The biggest story of the day was the move in Gold and Silver. We have heard EVERY opinion there is known to man about both precious metals, but today is very telling where both metals want to go for the foreseeable future. Stocks followed to the downside with the precious metals. Volume jumped on the day, but S&P 500 volume was 47% below average and the NASDAQ 39% below average. Hardly the scent of professional selling today; despite today being a day of distribution we’ll need to see another confirmation to the downside. If we get another slide on volume greater than today, we’ll know something is up. Today wasn’t all that bad, but it does throw up a caution flag due to the price action.
Last night I said it would take a big price decline to really call into question the confirmed market rally. Today, although not that bad could get worse. We don’t know the future we can only go by the market action today. I would certainly always be protective of our backside and avoid any heavy losses. Keep an eye out for further price deterioration to pare back any weak holdings.
Today’s decline did help relieve any short-term overbought conditions the market may have had. McClellan Oscillator did point to the market being overbought and it doesn’t come as a surprise the market would come under some selling pressure. If this rally is to continue any downside action must be contained and orderly without major volume. Of course a follow-through type day would all but wipe out the concern today may have brought. The number of stocks above their 20 day average went from 66% to 48% just today alone. Remember, these can always get worse it is best to pay attention to the market action and leaving overbought/oversold conditions as secondary.
The China story isn’t, pay attention to the action of the Shanghai Composite index. I wouldn’t be too confident right now the Chinese have the ability to control their economy centrally!
Keep those losses light!
