Stocks Fall Across The Board On Lower Volume; Nasdaq Finds Support At The 50 DMA

February 13, 2007

For the third straight day, stocks fell, despite a couple of big mergers and acquisitions. Even weakness in oil and natural gas could not help the market make headway. The Saudi Arabia oil minister said OPEC may not implement new production cuts at the next meeting. Oil managed a 3.5% drop on that news and natural gas fell .60 cents, putting pressure on oil stocks. XOM COP HAL and SLB felt the pressure and helped lead the AMEX oil indexes lower by 1%.

At the close, for the indexes, the Nasdaq led to the downside with a .4% loss, the SP 600 and SP 500 fell .3%, and the DJIA fell .2%. Bad news again came from leading stocks as they, once again, led to the downside, with the IBD 100 falling .6%. Leading stocks like CHDX and BMC got crushed.

Volume was much lower on the NYSE and the Nasdaq. The lower volume helped the indexes avoid another distribution day. And with the Nasdaq finding support at the 50 dma, the low volume pullback is actually very comforting considering that the selling could have followed-through from Friday. Breadth was negative on both exchanges, with decliners beating advancers by a 3-to-2 margin.

It was a steady day of light volume selling that came with a late day minor bounce that managed to take the indexes off their lows. The last hour bounce helped the Nasdaq find support at the 50 dma, which is a positive in a short-term market with more negatives. This action today continues the trend from Friday of the selloffs not finding the buyers like they were previously in this uptrend. And that has to be in part due to the overbought conditions the market is in. Even though the market is holding the 50 dma, unless more volume comes into the market on the upside and dips are supported, I doubt it will for much longer. However, until it actually falls below the 50 dma, it is just preparation-speculation.

Once again, today, I had a lot more stocks to completely and partially sell-off than I had new purchases. This continues a constant trend. Along with action, I am finding few new longs of quality even setting up. The new longs, recently, have all been of the speculative quality. Sure some have CANSLIM qualities, but some qualities is not the same as a perfect CANSLIM long. That is where EPS, sales, and the chart are all going in the same direction–up. Also I am keeping the buys of these new speculative longs small and will continue to raise cash to have on hand incase better stocks show up.

I have a lot of big winners giving clear sell signals and with so many winners giving those signals I really don’t want to be going all-in on any new longs. I like to go all-in when stocks are breaking out left and right, after a market has given a FRESH follow-through day from a long downtrend. Right now, after a four-year bull run, going all-in on new longs seems silly. It is best to wait to buy great stocks from beautiful patterns after the market gives us a pullback. Bottom line: Just be careful here. Don’t get cocky and think that a bounce is definitely going to happen. Things have obviously changed and you must realize that those are the facts.

There is a truckload of economic data this week. Retail sales, Manufacturing numbers, Housing numbers, and Producer prices are the important numbers on tap. Ben Bernanke is also going to be giving testimony before Congress and that always has the possibility to move the market. Whatever happens, I will be on it; I am always prepared. No matter what happens I will know what to do and will let you know what to do. If you are a gold subscriber you can go to the “complete sells and stocks on watchlist” and see exactly what I am selling. By correlating that to your charts, you should be able to soon see why I take profits where I do. If you read the past five “daily market analysis” in a row, you will know exactly the game plan I am looking at for this market environment.

Aloha and I will see you in the chat room!!

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