Tuesday, March 11, 2014

Indices Suffer Major Distribution Day Leading Growth Sell Off In Above Average Volume

An early low volume rally attempt rolled over mid morning to close significantly lower as volume accelerated throughout the day. The Nasdaq chalked up its fifth distribution day, while the S&P 500 chalked up its seventh. Market distribution has grown to worrisome levels.

Leading growth stocks have failed to followed through to fifty two week highs during any recent rally attempt. Except for a few speculative names, the majority have lagged from open to close.

On the short side, several stocks bounced off important moving averages and followed through to the downside in above average trading. CommVault Systems (CVLT) tacked on losses for its fifth consecutive down day, Conn's (CONN) bounced off the ten day moving average after consolidating a major gap down on February 20th in low volume, and NU Skin Enterprises (NUS) and LKQ (LKQ) are rolling over at their twenty day moving averages.

With the Crimean independence vote Sunday, tensions with Russia continuing to simmer, leading growth stocks lagging and failing to follow through, high levels of market distribution, and short setups following through to the downside, traders need to be short or in cash. Few long trading positions are worth holding through pullbacks.


Lululemon (LULU) broke down from a head and shoulder pattern on December 12th in heavy volume following a poor earning's report. The stock has consolidated into its fifty day moving average on low volume. A break down below recent lows and downtrend line should be shorted. Be aware, earnings are expected March 27th.

Energy XXI (EXXI) has been trying to breakdown from a three year head and should pattern. The recent consolidation in to the fifty day moving average came in low volume. Today the stock suffered a major stalling day in higher volume. A break below the two day low, could see the stock follow through under $20.

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