Stocks stumbled after a poor reading from the ISM Non-Manufacturing index. Despite a moderate figure from the ADP employment report the drop in the ISM index really shook traders. Sellers were in full control as stocks were heading into panic mode just before the one o’clock hour. Buyers were able to save the day from the selling carnage. At the end of the day volume appeared higher across the board. IBD has NASDAQ volume lower while Bloomberg indicates volume was actually higher. Regardless, our market leaders took a big time hit and we’ll count today as a distribution day across the board. This market is displaying some mighty large cracks with leadership stocks giving off a might large hint of more pain to come.
We have been warning folks in our forums and chat room about this market. When leaders crack and the market show signs of topping action (stalling and distribution) we want to make sure we are on top of it. Here are a few excerpts:
“This guy on Seeking Alpha used to bash me all the time. Weird.
1980XLS: Credit to Josh Hayes. Two days ago he said he felt this was coming”
“OPEN WWWW FTNT PAY BIDU join the list of high quality stocks getting hit hard. We are nearing a top. MKTX TDSC ROK APKT UA GOOG already hit.”
“Major tops on some recent movers:
MOBI, REDF, SIFY
Don’t be surprised if we see a bounce for a day or two…
Jobs number coming up Friday, should be an interesting week fer sure!
SFSF was a big winner from the 9/1 follow through.”
As you can see a few posts were indications of where we though this market was going to head. Now with the market with back to back distribution days and a stall day on Monday clearly this is not an orderly pull back. Orderly pullbacks unlike what we have now, even with a distribution day sprinkled in is acceptable to have. What is not acceptable is what we are seeing here. Despite the support we have seen intraday it isn’t enough to overcome the damage being inflicted on the market leaders.
Could this market turn around and zoom higher, yes. Probabilities are not in favor for higher prices right now and our expected outcome is lower prices. Today we did see the market hit short-term oversold conditions and it doesn’t come as a surprise given the past three days. A bounce over the next day or two would not come as surprise to us. But, the overall weakness we are seeing it spells trouble for the market.
Commodities continued their slump as sellers continued to unload their positions. Regardless of margin requirement hikes, the moves seen are certainly spelling further trouble for individual commodities. Sugar has been getting hit for sometime, the remainder of the commodities are playing catch up. An interesting take from the head of Minyanville, a sharp decline in metals often proceeds a big drop in the stock market. We’ll see if this pans out, but given the current information we have it does not look good.
Protect your back side, cut your losses.
