The market continues to act bearishly as gains from the morning session were unable to hold as buyers were unable to hold up prices. It was clear the market sell-off insuing after the market hit the high of day was due to the Obama budget plan. Prices dove as sellers quickly went out looking to dump stock on the market and proved to put in another bearish reversal. The NASDAQ was lucky enough to bounce and end near the day’s open, but over on the NYSE stocks weren’t as lucky. Financials weighed heavily on the market while technology tried to boost the market. In the end, the stock market finished off the session highs on suspect trading and we continue to seak caution.
On a positive note there were a few stock market leaders providing a silver lining to the day’s action. However, we’ll need the market to cooperate if we are to see these leaders push higher. Without the market, selling pressure will eventually take down stocks acting well. It is a matter of time, not if it will happen. Any bearish roll over in the market in the next few days with volume will certainly be a big red flag no matter what leading stocks are doing. A big tell will be if these leaders begin to roll over and sell off prior to the market catching wind of their action.
Tomorrow we’ll get revised sentiment figures from the AAII survey. It will be interesting if the stock market action at the end of last week coupled with the beginning of this week moved in the bulls, bears, or neutral camp. The II survey continues to be at multi-year highs and is a reason for extreme caution in this market. This market certainly giving the bulls hope we can still move higher, but the continued action of gapping to the upside then selling off is of bearish nature, not bullish. In 2010, there were plenty of times, including in 2009 where volume wasn’t ideal. However, price action was and given the Fed’s easy money we continued higher. Now, we aren’t seeing the prototypical bullish action in prices and volume continues to favor the downside. Are we in a correction? Perhaps, the signs are pointing that way and is precisly why you need to take profits and cut your losses in this environement.
Cut your losses fast here, do not “hope” your positions will move higher.