Sellers were out in full force throughout much of the day as stocks were sold without a thought. Yesterday’s rebound from the lows appeared to be accumulation off the bottom. Rebounds with volume off the lows is a sign of strength, but today we saw that strength give way to the selling pressure. Price action certainly trumps volume today as the percentange loss is far to great to ignore. There wasn’t much that wasn’t harmed as breadth was quite comprehensive on the downside. Today’s action left the major indexs sitting above their 50 day moving averages and major uptrend lines.
This rally is certainly under some serious pressure and warrants a defense position. We’ve seen the market teeter on the edge back in late August and early September. At the moment, we have two major distribution days on the NASDAQ and one minor one and while the S&P 500 has an equal portion of major and minor distrbution days. Is this the end, it might be or it could be one heck of a shake out. The best course of action is to cut stocks that are looking weak and below any support level.
A report from Goldman Sachs helped fuel sellers fuery with a revision to their non-farm payroll estimates from -200,000 to -250,000. Consensus prior to the revision was -175,000 the revision from Goldman certainly did not sit well with traders. This will certainly make Friday’s report one that will be much anticipated.
It would not come as a surprise to me if we continue to the downside and have a correction. Corrections are apart of the market and we should expect we are going to have these. The important issue at hand is how you take it stock by stock and remove all emotions from the decision making process.
Taking a look at some enternals:
9 new lows, 236 new highs.
41% of stocks are over their 20dma
68% of stocks are over their 50dma
90% of stocks are over their 200dma
One month ago here is how the picture looked:
35% of stocks were over their 20dma
71% of stocks were over their 50dma
87% of stocks were over their 200dma
Leading stocks were hit but volume was low and below average. There weren’t any leading stocks that had terrible days on big volume. Yes, there were some stocks that had above average volume, but the volume was not overwhelming. In the end, we have price damage and we should be cautious heading triming back weaker positions.
We need to see strength come back into this market, until then keep a defensive posture.
