The morning gap higher was quickly sold and sold hard as stocks were steadily sold off throughout most of the day. Bulls were certainly out taking profits as sellers continued the selling pressure. Volume on the NYSE was running hot along with the NASDAQ during the first half of the day, but unlike the NASDAQ the NYSE volume ended lower on the day. NYSE indexes avoided a distribution day while the NASDAQ notched it’s second straight day of distribution. Leading stocks continued to be mixed while overall aren’t outperforming and is causing doubt about whether or not this market is going to move higher. Thursday’s action raises a red flag on the market and will put us in a defensive position.
It certainly isn’t pretty out there at the moment and there is cause for concern as we just witness the NASDAQ put in back to back distribution days. The market is now expecting companies to not only meet or beat but to knock the cover off their next quarter guidance. These expectations are more than likely too much for many stocks to take on and will suffer selling pressure. At the moment, with all the bearishness that is out there we could certainly see selling pressure regardless of volume continue. It is how you position yourself to prepare for either further selling or flat markets is what will set you apart in your portfolio.
At this point in time the stocks that look strong are certainly WAY TOO extended to even think about adding a new position. Not too mention the red flag with back to back distribution days. Buying anything extended from a proper pivot or add level leaves you open for big time losses and will leave you beaten down. It is best to sit on your hands and wait for a proper entry point, but remember the market has to be cooperating in order for me to get long any stock. Just as important is to have a game plan as to where you have an exit if your buys happen to go against you. Cardinal rule #1-5 is to cut all losses short, ignoring this rule opens a pandora’s box in your trading account.
If the market moves down here, then so be it and I will trade accordingly. Removing emotion and opinion from trading is of the utmost importance. The market could careless if you think it is about to roll over and retest the March lows or even if you think the past two days were simply a blip on the screen. Right now the market is signaling that it is more than likely tired, again the NASDAQ moved more than 200 points in under a month. Although it was on impressive volume it did come real quick and when these moves happens the market tends to correct. I am simply ready for any move this market wants to make.
Enjoy your Friday and have a wonderful weekend.
FREE YouTube small video to teach you how to read the stock market CORRECTLY (full size available on forums for Platinum and Gold subscribers):
