A red day on Wall Street for technology stocks as the NASDAQ marks another day of distribution. The day started off on the right foot as there were gains across the board. Sellers took to the market very quickly and did not let up. Relief came in the final hours of the afternoon, but the damage was done. Volume ran much higher on the NASDAQ as traders rushed out of technology stocks, but the NYSE volume finished lower. Utility stocks helped cushion the S&P 500’s blow as the group ended higher by 35bps. The red flags are there; the market is under distribution and is signaling trouble ahead.
There is one silver lining to the day and I am not referring to SLV. The NASDAQ was able to hold onto its 50 day moving average as traders did support this key level. This is the third such time we have seen the index find support at the moving average, but we’ll need to see the index retake today’s high and eventually February’s high. The lack of thrust off the moving average would confirm a move lower is indeed eminent. The best course of action is to stay defense and cut your losses rather quickly.
There certainly has been plenty of churn in this market, not too mention the increased volitilty is creating headaches for some. Today’s move put the McClellan Oscillator (a measure of overbought/oversold conditions) in oversold territory…not to say it can’t get much worse, but how quickly it went into oversold territory means something. The important thing to keep an eye on here is how our market leaders react here and if the market can push higher.
Economic news will be light tomorrow with the NFIB Small Business Optimism figure as well as the IBD/TIPP Economic optimism being released. The talking heads will likely be focused on QE3 and the Middle East while we will be paying attention to price and volume action. Stock market trading does not have to be overly compliacated. Keep it simple and stick with Big Wave Trading.
