Nasdaq Suffers A Distribution Day, As Stocks Fall Across The Board; Big Caps Hold Ground.
January 18, 2007
Stocks suffered a rough day, on Wednesday, as INTC’s pricing battle against AMD weighed heavily on the Nasdaq, with INTC selling off. A weak Fed beige book report and a stronger than expected PPI, more than likely, did not help either.
At the close, the Nasdaq led the way on the downside, falling .75%, the SP 600 and the SP 500 fell .1%, and the DJIA fell .05%. Today, unlike yesterday, the IBD 100 and leading stocks led to the downside, falling .8%. The IBD 85-85 fell .6%.
Volume was higher on both exchanges. On the Nasdaq, volume was noticeably higher, giving the Nasdaq its second distribution day in four weeks. On the NYSE volume was marginally higher. That along with the minor price losses avoids a distribution day for the NYSE. The NYSE has still has flashed only one distro day over the last four weeks.
Breadth was positive on the NYSE with advancers slightly beating advancers. Positive breadth on a down day is a very nice thing to see in the indexes. And on the Nasdaq, decliners beat advancers by a 9-to-7 margin.
The strength in the NYSE was due to oil getting a rebound off the back of the selloff in tech land. Lot’s of beaten up oil issues were able to find a bid today. However, with all that overhead resistance, don’t plan on that party lasting too long.
The weakness in the Nassy was definitely due to earnings from INTC. CSCO sold off hard and closed below its 50 dma, AAPL’s earnings were not taken particularly well last night, and many other large caps closed lower on the day. These large caps made the selling today seem worse than what the action underneath was.
The volume and price decline did not indicate funds were falling over each other to dump shares everywhere. I had less than a handful of stocks to fully cut my losses on today. These are signs that funds are not dumping stocks.
Instead the market is finally pulling back and cooling off some of this strong momentum the indexes have had this year. Even with the less than 1% decline today by the Nassy, it was the worst day of the year so far by that index. That is pretty darn impressive if you ask me. Today’s pullback seemed fine to me. Nothing to get anxious or worried about yet.
Some traders believe we have set ourselves up for a sell-the-news situation. So far they look right but they are only right on a very very short term basis. The trend is still up on the market and the indexes could digest these gains very quickly and blast right off to new highs.
All I know is that if a .75% decline is considered a selloff, the market is in great shape. Maybe we selloff more, but until we get at least two more distribution days and the Nasdaq in a downtrend under the 50 dma on a sub-intermediate basis even thinking of shorting this market is stupid and a pursuit of an amateur trader.
Maybe we rotate into gold for a little bit but with all the damages done to those charts I am sure the pullbacks in these strong trending Nasdaq stocks will be bought. It is if these stocks do not find support at key levels that will have me worried.
Until we cross that bridge, I will be swimming upstream with the trend.
Aloha and I will see you in the chat room!
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