Sunday night the market digested disappointing data from China showing their economy growing slower than many had previously thought. Gold and silver continued to decline after last night’s fall closing near the session lows. Two economic reports were released States side with the Empire Manufacturing index disappointed as well as the NAHB Housing Market index. Selling remained intense for much of the session as volume soared well above Friday’s level. Small cap stocks measured by the Russell 2000 fell about 3.8% leading the charge lower. Today’s action nearly wiped out last week’s gains and with the heavy volume our uptrend is under pressure and darn close to flipping to correction mode.
This type of action does not typically occur in bull markets. Big price declines on heavy volume of this magnitude after breaking to new highs is typically not a good sign. We joke in the Big Wave Trading chat room that this is a Quantitative Easing buy signal! Of course we are going to gun sling here and stick to our rules. However, this has a different feel to it this time with commodities falling hard. We can’t explain nor do we care to explain why this decline happened. Perhaps the market is sensing the Fed may put on the brakes and/or economic data is about to get really bad. No one knows all we know is today’s price action is throwing caution to the wind.
Over-shadowing the end of day action of the market and the plunge in commodities was the devastating situation in Boston. A terrible situation occurring at the Boston Marathon where an explosion at the finish lined caused death and severe injuries. Tragic.
Although overshadowed the destructive price action in Gold, Silver, and Crude Oil certainly is telling a story we’ll hear about later. Commodities have not moved in tandem with the market and have been in a downtrend for a bit. Today the commodity complex accelerated its downtrend and it appears we’ll have lower prices ahead. Are commodities indicating a slump in the economy? It is anyone’s guess and what we know is the price trend is down with lower prices likely.
The uptrend we have had in place is not on very shaky ground at the moment. Stick to your rules.
