Heavy trading in Citigroup dwarfs the market as we are reminded we are in a shaky market. The NASDAQ and S&P 500 closed just off their lows of the session suggesting very little support for the indexes. Citigroup certainly skewed volume, but with the amount of distribution on the indexes the price action today far outweighs volume action. This type of action may be indicative of where we may be heading or one massive head-fake. Regardless, it is time to be defensive.
The AAII reported its Bull and Bear index showing Bears dwindling in population. Twenty-eight of its members are bearish while forty-two percent are bullish. These types of sentiment figures should give us some pause given the market condition. On the flip side the NYSE short interest ratio sits at 12.18. Taking this with a grain of salt it appears to me the smart money is short and retail is getting bullish.
Tomorrow we are only dealing with quadruple witching without any economic data to influence trading. Today we saw jobless claims rise while the Philadelphia Fed index saw a big uptick in manufacturing. Despite an eight month gain in leading indicators the market could simply not muster up the support.
The upfront issue of the day was the weak pricing of Citigroup’s offering. The US taxpayer certainly is going to have to step up and pick up the slack once again for a failed institution. Financials continue to be a drag on the market and today was another example of why this market has been range bound.
Our reaction is to be cautious here and take our cues from our individual stocks. This market does highlight the need to be a bit more nimble and quick with profits and losses. It is unfortunate we do not have a market supporting stocks moving like our past big winners. Instead, we will continue to play the hands this market is dishing out.
There is a strong possibility this market will usher in a correction. Since our March lows we have seen an unprecedented climb without a 15-20% correction. Market corrections are perfectly healthy part of the stock market and it may usher in better looking charts. It would also increase the probability of stocks running like our past big winners.
We are staying cautious and focusing in on the action of our stocks.
