Picking The Right Time
Four
distribution days in an index within a two-week timeframe can spell
“The End” for any rally. That is just what the S&P
500
(
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PowerRating) and Dow Jones
Industrial Average
(
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PowerRating) posted on Wednesday, thus ending their rally
chances.
The Nasdaq
(
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PowerRating) has posted three distribution days in the same period and only needs one more to
say the same thing. Unofficially, just about every aspect of the Nasdaq rally is
dead. It has undercut the low of its follow-through day and it has made very
little progress higher since the bottom on May 7.
The rally has been suspect since it
began. Very few indicators pointed to this rally succeeding. One of the most
important points is that there have been very few stocks able to breakout and
push higher.
Autozone
(
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PowerRating) remains one of the few that has actually held its pivot, and stands a
whopping 1.3% above its pivot of 80.10, assuming you were able to buy it there.
Fidelity
National Financial
(
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PowerRating) attempted a breakout yesterday, but
lacked volume and a close above its pivot of 30.60.
Retailers have been getting hit over
the last few sessions, marking a possible end or at least a correction for this
group. Ann Taylor [ANN
ANN], Chicos FAS
(
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PowerRating), Christopher
Banks
(
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PowerRating) are examples.
For the first time since its rally
began in late November, NVR
(
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PowerRating) has
pierced its 50-day. Obviously, this is a sign of trouble in more ways than one,
since NVR has been a leader in the Homebuilding group. Ryland
(
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PowerRating) has also been hit, but still trades above its 50-day.
So in conclusion, stocks are doomed
and we should never trade them again! Of course I am as kidding I could be about
that point. This uncertainty, however long it may last, is a necessary evil for
the stock market. Many sentiment indicators have yet to swing in favor of a
sustained rally.
Bullish/Bearish Investment Advisor
sentiment, the Put/Call ratio, the VIX, to name a few, are some indications of
mass opinion too comfortable with the market. As a correction, or even a re-test
of the September lows unfolds, bearishness will have a chance to seep into the
public sentiment and then the market will be ready to power higher for many
months at a time. Smart investors can only continue to watch the averages and
leading stocks in order to pick the right time to leave the safety of the
sidelines.
Have a great weekend,
Â