Now You Know Why You Have To Dig A Little Deeper

Random Thoughts

As you know, lately I have been concerned about the internals. At a face value, the Ps (S&P 500) recently at all-time highs was a good thing. However, as I preach, you have to dig a little deeper. And, what I have been finding has kept me cautious. This is why I wrote the column about why we should not have a big party just because the Ps are at new highs.

Let’s look at the carnage:

The Ps lost 2%. This action has it breaking down out of its recent sideways trading range.

The Quack (Nasdaq) lost just over 2%. This action has it returning to the bottom of its shorter-term range which also corresponds with the March peak.

The Rusty (IWM) was the big loser. It lost over 2 ¼%. This action has it continuing to slide out of its recent Bowtie down (and First Thrust).

The sector action was ugly.

Energies and Chemicals broke down out of their high-level sideways trading ranges, similar to the Ps.

The Semis sold off hard out of a First Thrust formation. This action is disappointing because they were just recently at new highs. When a market has a transitional pattern like this, the most amount of people are trapped on the wrong side of the market. I’ll flesh this out later today in the chart show.

A plethora of recently weak areas such as the Foods and Manufacturing accelerated lower.

I can go on and on but just know that there  was no place to run, no place to hide. Out of the 239 sectors I track daily, only a handful-literally 5-ended higher.

Now you know why you can’t take things at face value and have to dig a little deeper. Speaking of digging, both my DSL lines are back up from Urkel-did-I-do-that?-the over zealous excavator. So, let’s have a make-up chart show at 11:00 EDT. Given the situation in the market, it’s just too important not to.

Okay Big Dave, thanks for the “report.” Now what? I had hoped that the signals, especially the Bowtie down in the Rusty, would not work but obviously they are. As usual, take things one day at time. On a bounce we should see some shorts setting up. Wait for those setups to occur and then make sure you wait for entries. If the market decides to go straight back up, that, in and of itself, can often keep you out of new trouble. And finally, and obviously, honor your stops on any leftover longs. Trust me, he who fights and runs away lives to fight another day. They don’t always come back. If you get bored (really bored), see my column archives for my reoccurring the market is a bad teacher lessons.

Best of luck with your trading today!

Dave