Crude oil continued its fall today while sellers took over the stock market just before noon time.  Volume was up across the board as the market notched its 3rd day of distribution in recent weeks.  Another ominous sign for the markets was we got another Hindenburg signal.  Leading the decliners was once again small caps stocks as the Russell 2000 was down 1.28% on the session.  The Dow was down 106 points, but was the best performing index only closing down by .59%.  Our market model is in neutral mode, but if we see further distribution it will be pushed to sell mode.  For the second straight week the Monday session has been less than desirable.  We remain in limbo after today’s session and caution is warranted.

A positive sign for the market may be we found support at last Monday’s low.  There was heavy selling after the market was able to reverse the morning’s losses.  It was not until after 2pm when we approached and sliced through last Monday’s low where we found buyers.  While we did push off the lows we really never saw enough buyers rush in to erase the day’s loss.  At least the Dow was not down more than 1%.  While it is only one day we will need to see this market not follow through to the downside and find support.

Every Bear’s favorite signal the Hindenburg has triggered four times recently (chart posted below).  While it did help “foreshadow” the September to October slide it is far from perfect.  It triggered quite a bit in 2013 and we just saw the market climb higher.  Sure, it could be right this time.  However, we need a bit more confirmation with price action before we are about to exit out of this recent uptrend.

2014-12-08_NYSE_COMP_HINDENBURG

Taking a look at stocks above their moving averages is a very interesting exercise.  Coming into the day, only 55% of stocks were above their 21 day moving average.  Only 52% of stocks were above their respective 200 day moving averages.  Typically, we have seen these numbers a bit more elevated at market tops.  Or is this a sign of weakness?  Oh, NYSE new lows outpaced new highs today (232 new lows to 203 new highs).  Given we have some breakdowns in stocks, distribution, and the Hindenburg this is not a positive development.  Keep vigilant.

I am not one for magazine covers indicating market turns, but this weekend’s Barron’s cover was quite interesting.  If you have yet to see it, check it out.  Essentially, all calls for a new bear market will be wrong because “it is different this time.”  How many times have people said:  “it is different this time” and it has not been?  Of all places this is coming from Barron’s.  Perhaps it will be different this time around like Barron’s says.  I would rather rely on our methodology rather than a magazine to tell me how to trade.

Last week we saw BITA get demolished after IBD removed it completely from the IBD 50 even though it was the number one stock.  The stock was absolutely crushed last Monday and the selling carried further throughout the week.  Well, the stock was added back to the IBD 50 this week in the number slot and the stock was down nearly another 2 points.  A shame after the stock showed some potential, but we move on.

Another stock to keep an eye on is AAPL.  The stock was down nearly 3 points at the close and sits just above last Monday’s low.  We saw on Thursday it was unable to recapture its 10 day moving average.  Last Monday’s low will be a key low to watch for as we push forward.  AAPL is such a large part of the NASDAQ where it moves the NASDAQ is likely to follow.

NFLX is a former high flier on watch for a major breakdown alongside AMZN as well.

One should be cautious in this environments as we have a few warning signs.  We do not have an all-out sell signal yet.  We will proceed with caution.