Tuesday, July 08, 2014

Stock Market Exhibits Danger in Ignoring Warnings

The market suffered a major distribution day today. All the major indices were down close to one percent or more in heavy, above average volume. The SP 500, the lead index, registered its eighth stalling or distribution day in the last four weeks and the Nasdaq registered its sixth. The market has shown little in the way of accumulation since the follow through, except for a day or two here and there in areas where shorts would be forced to cover, squeezed, and longs panicked into buying...near new highs. As expected (Shortage of Sellers Explains Rally), the market began stalling and distributing as the Nasdaq finally joined the Dow and SP 500 at new highs for the year. And nothing like a little fluff over the old highs to squeeze the most bears and trap the bulls.

Leading growth stocks lagged for most of this rally, sold off significantly in higher volume. The few stocks that managed to make progress are now too extended, and most breakouts that failed to make any progress are failing or on the verge of failing. Wide and loose, late stage bases, low volume breakouts, lack of follow through after breakouts, and lagging relative strength lines, plagued leading growth stocks from the beginning. Oil and gas stocks were the highlight of the day, closing higher or at the highs of the day: Pioneer Natural Resourced (PXD), Kodiak Oil and Gas (KOG), Concho Resources (CXO).

Short trading idea stocks have started to breakdown in heavy, above average volume. Costar Group (CSGP) and Alpha Natural Resourced (ANR) rolled off their fifty day moving averages, Amazon (AMZN) and Jinko Solar (JKS) sliced through their ten and twenty day moving averages, and Yahoo (YHOO), Wynn Resorts (WYNN), and Sohu.com (SOHU) sliced through their fifty day moving averages.

This has been a difficult few months to make money on the long side and warning signs (Market Distribution Joins Growing List of Sell Signals) added up by the day. Investors/traders had to take profits, or at a minimum, tightened stops to protect profits in over extended positions, and/or to protect small profits and prevent losses in lagging positions. As seen by today's market action, eventually the market acts on its warnings, and weeks of profits can vanish in a matter of hours. Cash or close to cash with a short or two is the best position. Weak rally attempts over the next few days should provide more short entry opportunities and some day trading long trades.


Market Distribution Joins Growing List of Sell Signals - Read More

Shortage of Sellers Explains Rally - Read More

Deceitful Market Difficult to Navigate - Read More

Market Rally Resumes Poor Price Volume Action Dominates - Read More

Trend less Market Atrocious For Traders - Read More

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