The Market has a different feel this week as we experienced 2 Distribution Days on the Nasdaq. Distribution Days are a sign that Institutions are selling stock. Market rallies tend to fizzle and correction begin with 5-6 Distribution Days. We now have 3 Distribution Day on the tally.
More importantly, it is critical to watch your stocks and the leaders for further evidence of the health of the general market. If you recall, in November the indexes experience some pullback but the leading stocks never budged which was the clue the uptrend was intact. Now, while the indexes are holding up decently, the leaders are getting hit which is the "tell" that we may be in for more of an intermediate term correction. Another indicator, bullish sentiment, is near the highest levels we have seen in the last two year. History has shown that most bull runs last 24 months. We bottomed in March 2009 so we are very close to the historical average.
However, all that matters is whether the market leaders are holding up. In evaluating many leading stocks, many are beginning to lose their 50 Day Moving Average (DMA). A stock that loses the 50DMA on heavy volume is a sell sign for me. It is important to have strict sell rules for any stock you own.
Some examples of leaders now under the 50DMA include CMG, CRM, FFIV, BIDU, NFLX, DECK and AMZN. Some recent breakouts are not holding and now back to their pivot points or under them. Examples of this includes NTAP and VMW. Another warning sign is the reaction to the earnings numbers of both AAPL and GOOG. Both companies announced numbers well above estimates, they rallied and then reversed much lower on heavy volume.
So while you can't completely put a fork in the latest uptrend; we have several warning signs. It is time to be off margin and on guard for further downside. The market requires a more protective stance right now and there is nothing wrong with getting back in if the market reasserts itself and makes new highs. But to me now, cash is king.
Friday, January 21, 2011
Sunday, January 2, 2011
JANUARY 3, 2011
Happy New Year to all......
We can expect to see volume come back in the indexes and stocks this week. It remains to be seen if Institutions want to continue to sell the leaders. The indexes are still in very good condition; however have rising in very light volume. The leading index, the Nasdaq, only has 3 Distribution Days on its tally. Leading stocks have sold down in equally light volume and in most cases their 50 Day Moving Average have served to hold. BIDU was the first leader to lose its 50DMA and then last week NFLX and CMG failed to hold their 50DMA. It doesn't appear that any severe damage was done but definitely gives me reason to be on high alert. It doesn't pay to try and anticipate what the market will do but rather wait, observe and then make trading decisions. The liquid leaders of 2010 are all within reasonable distance from new highs and until otherwise proven guilty are on any longs short list for the start of 2011. However, some are extend and many don't offer logical buy points here. Stocks that continue to lead include:
AAPL,ACOM,AMZN,ARMH,CRM,FFIV,FTNT,LULU,LVS,NFLX,OPEN,PCLN,RVBD,VMW
We can expect to see volume come back in the indexes and stocks this week. It remains to be seen if Institutions want to continue to sell the leaders. The indexes are still in very good condition; however have rising in very light volume. The leading index, the Nasdaq, only has 3 Distribution Days on its tally. Leading stocks have sold down in equally light volume and in most cases their 50 Day Moving Average have served to hold. BIDU was the first leader to lose its 50DMA and then last week NFLX and CMG failed to hold their 50DMA. It doesn't appear that any severe damage was done but definitely gives me reason to be on high alert. It doesn't pay to try and anticipate what the market will do but rather wait, observe and then make trading decisions. The liquid leaders of 2010 are all within reasonable distance from new highs and until otherwise proven guilty are on any longs short list for the start of 2011. However, some are extend and many don't offer logical buy points here. Stocks that continue to lead include:
AAPL,ACOM,AMZN,ARMH,CRM,FFIV,FTNT,LULU,LVS,NFLX,OPEN,PCLN,RVBD,VMW
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