The market suffers a major distribution day

Technology earnings and banks sent stocks lower throwing up a day of distribution for the entire market.  It has been a long time coming for a day like today where distribution of the heavy kind overwhelms the market.  A few weeks ago we saw cloud computing stocks take a tumble, but the market held up.   Today the market wasn’t as lucky as major indexes sold off in heavy volume as traders fled for the sidelines as fast as they could.  There were a few bright spots, but the market was begging for a pullback and we finally got one.  Our uptrend remains in place, we may be a bit bruised, but the market remains in its uptrend.

Commodities took a tumble today, but again like stocks they were quite extended and a pull back is isn’t out of the ordinary.  Given the recent moves a break in the action is quite normal and a healthy part of any uptrend.  With that said, since March 2009 we have yet to see a major correction of 20% to reset the market.  At some point, we’ll see another bear market of 20% or greater in size, but for now even with today’s action our uptrend is still intact.  We need to see further erosion in market leaders and heavier distribution to knock this rally completely off its feet.

Just about every indicator you can imagine had pinned this market as overbought and rightfully so.  But, this doesn’t mean the market is about to roll over and play dead.  A few days or more of simple consolidation will be all the market needs to make another push into the year end.  Let’s not forget mid-term elections are less than 14 days away and the outcome will greatly affect our political landscape.  It wouldn’t be out of the ordinary for the market to take a rest prior to the election.

The NASDAQ has only two days of distribution, but a key level was held today.  On October 13^th the market gapped higher and today we held the gap. A break through the 2426 level would have sparked a bit more panic selling, but holding that key level showed willingness from buyers to step up and hold the NASDAQ from fall further.  If we suffer another major distribution day tomorrow we’ll have to get a bit defensive, but for now the market’s uptrend remains healthy.

Remember to take some profits on the way and always cut your losses!