Market correction deepens as volume swells across the board
Economic news helped fuel the fire in sellers pushed stocks lower at the open. Volume swelled on the NYSE and NASDAQ as institutions rushed into the market to dump stock. The market has been under pressure since late February when leaders began to show some weakness, but now we are beginning to see some major selling pressure. Stocks did find a bid as the S&P 500 found support around 1300 while the NASDAQ found support at 2700. Volatility jumped at the open and sloshed around while stocks whipsawed throughout the day. Selling pressure was just too much for the market as stocks closed near the lows of the session and failed to hold any resemblance of support.
Investor sentiment held steady with Bulls coming in at 36% and Bears finishing at 32%. These levels were unchanged since last week despite the market action. Perhaps we’ll see a shift for next week, but clearly shows investors are not showing fear of this market. This is precisely why paying attention to the price and volume action of the market and stock leaders rather than investor sentiment. Sentiment is merely emotionally based and should only be used as a reference point near market turns. For example, in September of 2010 we had extreme bearish readings near a low and we found ourselves kicking off a 6 month bull run. Stick to price and volume action in stock market trading rather than emotion.
It is clear this market is in correction mode and it is best to stay safe, keep that powder dry for when we do get a new uptrend. There are stocks like CMG who bucked the trend today and is holding its 50 day moving average. We’ll certainly keep our eyes peeled on CMG and other potential leading stocks holding up during this correction. However, at this time shorts are the place to be and we have turned our attention to the short side of the market.
As of late we have been indicating this market was headed for trouble. How long and how far we go is anyone’s guess. Despite what people may think about this market or think where it can go they do not have a clue. Do not listen to market pundits opining about the market, instead listen to the price and volume action! As always, please cut your losses short to keep that powder dry.
