Another gap and trap day where stocks weren’t able to hold the gains seen at the opening of the day. Gap and traps aren’t bullish movements, but bearish ones and today’s move came with increased volume on the NASDAQ as volume slide on the NYSE. A few mergers in the morning helped boost the mood of traders, but sellers were able to wrestle control away from the bulls. Continued bearish action on the NASDAQ with AAPL stock leading the way certainly has put a dark cloud over the market.
Since the middle of February we have been under institutional selling. After the lows seen after the Japan crisis the market did confirm a new uptrend with leading stocks breaking out. A few have held, but overall the reaction is simply not OVERWHELMING bullish. TZOO stock has had a climatic run and did put in a nasty intraday reversal. TDSC stock also succumbed to heavy selling today gaining support at its 20 day moving average. It is a blemish on the stock, but far from being bullish. The biggest of them all being AAPL stock has been experiencing heavy volume selling. A true sign of institutions dumping the stock is when you see big RED BARS in the chart. So far, not the ideal state for the market here and with options expiry Friday volatility will reign supreme.
Sentiment numbers will be interesting this week to see if the bulls were able to back off from their lofty levels. It is true the AAII investor is not as bullish as it once was prior to the Japan crisis, but it is now back above 40. The II survey continues to show readings of UBER BULLISHNESS. In addition to sentiment, breadth is waning. The McClellan Summation indext continues to notch lower highs and lower lows a sign these rallies are becoming less and less powerful.
We can still move higher here despite what we are seeing in terms of weak action. The market aims to fool making stock market trading very difficult. It is precisely why a game plan of entry and exit is needed. Prudent stock market trading takes time to develop and apart of the development is learning to when to cut your losses SHORT. Without this type of “insurance” on your portfolio over the long run losses will pile up and render your account useless. Lesson: Cut your losses and ride your winners.
