Distribution struck the market today with leading stocks taking a big hit as Small and Mid Caps lead the major market averages lower. A disappointing ADP employment figure casted doubt if Friday’s Non-Farm payrolls would exceed expectations. At 10 am EST the ISM non-manufacturing index couldn’t eclipse expectations giving sellers a reason to step on the gas. Volume rose on the day and was above average for the first time since the 15th of March. Another disturbing headline was North Korea clearing the way for an attack on the United States. At the close, the last minutes once again saw buyers snatch up shares “painting” the close. Our uptrend is now has reached a point where we have one foot out the door and any further deterioration would send us into sell mode.
One thing we are certainly obeying is our individual stock sell signals. Ignoring your signals and listening to the noise is a very dangerous game to play. There were plenty of sell signals in individual names today and if you are holding a stock flashing a sell signal do not ask questions just SELL. A few country ETFs are looking quite weak and they are EWI – Italy and EWP – Spain. EEM – Emerging markets ETF continues to act weak. SOX – Semiconductor index broke yesterday’s low. XHB – Home builders dove below its 50 day in HEAVY trade as it appears the housing stock recovery is weakening. You do not have to look hard to find weakness in this market and for now appears to be telling us lower prices are likely ahead.
Volume for the first time in quite a while was above average. The last time volume was above its 50 day average was on March 15th and it help with Quadruple witching. It has been over a month since we have seen volume above average without the help from end of the month rebalancing or options expiry. Institutions were selling shares today and it was quite clear with leading industry groups like the SOX and XHB dropping below their respective 50 day moving averages. Do not get complacent here.
Tomorrow is a new day and we’ll trade accordingly as the market moves. Stick to your rules and whatever the market dishes us we’ll take in stride.
