Monday, May 04, 2015

Tight Market Plagued By Red Flags

Every market attempt to new highs has been plagued by distribution. The Nasdaq and SP 500 have registered five distribution days over the last three weeks, and the DOW six. Volume over the last five months has clearly picked up on sell offs and barely registers a pulse on up days. Yet the market has failed to follow through to the downside despite the heavy overall distribution and stalling action. About the only good news, the market hasn't sold off either, but that could just be a matter of time.

Leading growth stocks held up well over the last few months until the current earning's season. Biogen (BIIB), Twitter (TWTR), LinkedIn (LNKD), and Harman (HAR) were hammered on earning's reports, Apple (AAPL) and Facebook (FB) reversed in heavy volume below their fifty day moving averages. None of the stocks have been able to muster any type of recovery. 

The majority of other leading growth stocks are still holding strong, but cannot manage to follow through when the market does rally. Even strong breakouts like Amazon (AMZN) and Netflix (NFLX) have failed to follow through past their breakout days. Netflix has shuffled sideways (NFLX) while Amazon (AMZN) has backtracked significantly.

There are still some pockets of strength that should be monitored especially in the Media sector. Nexstar Broadcasting (NXST), Sinclair Broadcast (SBGI), Gray Television (GTN),  are forming first stage, flat bases on top cup and handle bases, New Media (NEWM) is forming a second stage cup shaped base, Media General is forming a first stage cup and handle base, and AMC Networks (AMCX) continues to move higher after breaking out of a first stage cup and handle base in January.

Nothing would please me more then too be a flat out bull. Unfortunately, despite the market's inability to sell off in the face of bad news, there is very little evidence that the market is headed much higher, and plenty of evidence that a major correction is looming. 

In my opinion, the market still has its eye on the prize, closing above the Nasdaq's all time high of 5,132.52, but that is probably as high as it is going to get without any significant follow through by the market's leading growth stocks.


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