When you look at a daily chart of the NYSE or Nasdaq it doesn’t look like today was that bad. But no matter what that chart looks like, something felt bad about that late day breakout reversal (best viewed on a 60-minute chart). Late in the day, just after 3pm EST, the Nasdaq broke out to new daily highs. But right after the excitement buying entered, some pretty heavy selling was followed. The market sold off hard and fast in a very short time, and even though the selling slowed at the end, the big cap indexes all finished near their lows of the day.
Now, just like I said, the markets look fine on a daily chart and the volume on the NYSE was lower but it was still higher on the Nasdaq. If you count today as churing, this makes it 6 distribution days for the Nasdaq for the past three weeks. If you don’t count today, yet, it is only 5. On the SP 500 there is six, after today, making it officially under a yellow-flag caution to watch out for further selling. I would be a bit careful here with new longs, with the market seeing so much distribution on the way up.
What made me think that today was worse than what the indexes told is because my account took a hit and the IBD 100 fell 1.9% today, confirming that leading growth stocks were targeted. Dry-bulk shippers took the brunt of the selling. The other clear sign that something “might” (remember the trend is still up so we MUST keep a bullish bias for now–just be ready for anything) be wrong is that I have two short scans that search for shorts. One is set up to look for stocks over $75 that are down on the day, below the 50 day moving average, and trades over 250,000 daily. That scan has not seen the number over 20 since August. Even on the 11th and 19th there were not that many stock down as today. Today there were 27 stocks on the list. That raises a yellow-flag also.
But underneath the market, instead of having weak internals (like normally) we had strong internals with new highs beating new lows on both the NYSE and Nassy–107 to 48 on NYSE and 105 to 99 on the Nasdaq. Also, the put/call ratio is at .88 which is no where near a complacent .55 or anything like that. Also I see that the put/call on the ISEE is around 2.30 or around there. I get the data from Helene Meisler at realmoney.com. SO the sentiment still seems to favor the bulls. It doesn’t hurt that stocks like MSFT and GOOG performed so well today.
But there sure are a LOT of blowups this particular quarter. I don’t know how many stocks gapped down last quarter but it appears we are way ahead of schedule this quarter. There are a TON of blowups compared to the few big gainers. Another place to go to gauge the strength of the market is the IBD homepage. On that page there is a stocks on the move section. The stocks moving lower were much uglier than the stocks moving higher. That has recently started to become a recurring pattern. Just go take a look at the list before the opening bell. Or better yet, check your IBD and the where the big money is flowing in the NYSE and Nassy section. Losers look much uglier than winners and no matter how silly that sounds it is something we need to pay attention to.
So, I definitely remain bullish since most of my really nice to beautiful charts are still acting moderately well to well. It is when they start cracking, along with my five horseman (GOOG RIMM AAPL BIDU GRMN), that I will get bearish. For now the market remains in an uptrend and despite the Nasdaq and Nasdaq 100 hitting new seven year highs today. It seems no one cares about the new highs anymore.
All I know is that I care very much and I love what I do for a living. I love the stock market and I love not being in San Franfreako anymore. Aloha and I will see you in the chat room!! It’s good to be back home.
