The selling continues to be concentrated in technology stocks lead by AAPL, GOOG, PCLN and others. Another day of distribution and they have now piled up to where we are no longer in our uptrend. Today’s selling pushed us into a short-term oversold condition, but it is clear sellers have ruled the day. One bright spot on the day’s session was buyers finally stepped up and supported AAPL at today’s lows. Distribution has piled up to high and raising cash is a prudent move here. While this market may be able to reverse its fortune here it is never a good idea to trade on hope.
At the moment the market does not believe QE forever will help out stocks. Remember, after QE2 the market corrected only to resume its uptrend. November of 2010 was the month where the turnaround occurred. Is this time any different? Time will eventually answer this question, but we have to respond with what we have in front of us. Right now we have a market with a bunch of distribution days piled up high. Caution is warranted and to achieve this raising cash is an excellent way to accomplish this task.
We are a bit oversold at the moment and it is easy to see why. It would not surprise us one bit to see this market push back higher before making another leg down. Conversely, we could just rocket higher and resume the uptrend. Earnings season is now upon us and will provide major headwinds for this market. Earnings this quarter are set to be the worse since 2009 and will be a major drag on any chance an uptrend may reemerge. Stick with price action and right now it says to be cautious and raise cash.
Cut those losses short and where you have exit signals in profitable trades you must obey!