Wednesday, February 29, 2012

Bernanke speaks as stocks reverse hard closing out the Month

Big volume throughout the day signal a distribution day across the market making the count up to four for the NASDAQ. Four distribution days is certainly a cause for concern and after today’s reversal on big volume it does call into question if a correction is on the horizon. Market pundits certainly had a field day with Ben Bernanke’s testimony in Washington, DC today. But, the day’s action more than likely had much more to do about money managers’ allocation strategy than anything else. Speculation about the why is just that, but what is more concerning to us is the price action of the market. Today’s action was certainly another blemish on this uptrend under pressure.

It really is no surprise this uptrend would come under pressure at some point in time. This is not something that surprises us. Given the move since the day after Thanksgiving 11/25 and the 10/4 rebound a bit of rotation out of the uptrend’s leading names is expected. Mutual funds continue to raise cash for redemptions, but after 3 month run in the market they are likely to take gains off the table. A quick 3-5% correction is not out of the question here. The most important action is to make sure you are staying disciplined in your portfolio by cutting laggards and sticking with winners.

Gold and silver took it on the chin today with the dollar pushing higher. Perhaps Bernanke’s comments spooked traders or not the push lower was quite entertaining. Some are blaming a large quantity of Treasuries coming to market causing the big declines. Whatever the case may be what we have in front of us are precious metals giving up sizeable gains after breaking out. Caution is certainly warranted.

It is anyone’s guess if this market has indeed topped. Like I said in last night’s commentary, there are quite a few looking for a top. Stick to your plan and do not let opinions and thoughts from others plague your ability to execute your trading plan. Cut those losses short.

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