::: Today’s Market Action :::
Today’s Self Investors Leading Stocks Index said it all: 425 Decliners to 11 Advancers (see below).
It seemed like deja vu with today’s sell off. I mentioned in the weekend report the ominous sign of the stock tickers page in the men’s bathroom and how it reminded me of the discussion overheard on the plane days before the May meltdown. In May, Indian businessman were seen throwing themselves off bridges after obliterating their financial future with large speculation at the top of a frothy market. Now we may be witnessing the same in China after the government reiterated that it would take steps to curb this rampant speculation. It’s a shame that this behavior happens again and again, despite lessons learned. But greed is just as strong as fear, maybe more so. In our own markets the news proved to be the tipping point for a market in great need of a correction. The underlying concerns were there with the subprimes and slowing growth (in addition to the supposed assasination attempt on Cheney). It seemed everyone was waiting for a correction, but nobody could have predicted the magnitude of it. I was prepared with some hedging with buying of QID and a couple shorts and planned to continue to ease into a predominantly short portfolio. So much for that idea! I never got that far and got hurt today… it could have been worse. Funny how the market surprises EVEN WHEN you’re prepared for its move in a certain direction.
Here’s a look at the weekly 2 year charts which puts everything into perspective a bit better. That was some move today – you can see how it dwarfs the rest of the chart. It almost looks like a mistake! Notice the declining volume as the Dow made its move higher.. it was running out of gas. One thing to keep in mind is that it’s probably much too early to be catching the falling knife. There will undoubtedly be many opportunities for day/swingtrading on both sides of the market, but based on today’s move we’re most likely headed much lower. The next level of support in the Dow is the 11750 area which is another 400 – 500 points down. It’s an area of convergence where the 50 day moving average and the previous break out point. I might be looking for some longer term holdings at that point. It could happen tomorrow.. ..
In the Nasdaq, there is some support very near by in the 2400 range but I can’t imagine that’s going to hold. Not with the amount of momentum to the downside today. It will most likely blow through that level at some point tomorrow. The 50 day moving average around 2300 is a much more likely area for the Nasdaq to begin finding some support.
Similar chart here for the S&P – in all likelihood it’s going to drop to its next support levels around 1325 – 1340.. another 5% or so. Just how fast that will happen is anyone’s guess but chances are very good that it will within the next couple of weeks..
::: Major Indices Performance – The Numbers :::
(Note: volume averages are based on the average over the past 50 days)
Data as of 4:00EST – End of Day Feb 27th 2007
Yeah there was just a wee bit of distribution today.
Nasdaq: DOWN 3.86% today with volume 37% ABOVE average
Nasdaq ETF (QQQQ) DOWN 4.11%, volume 181% ABOVE average
Dow: DOWN 3.29%, volume 75% ABOVE the average
Dow ETF (DIA): DOWN 3.75%, volume 307% ABOVE the average
S&P ETF (SPY): DOWN 3.91%, volume 334% ABOVE the average
Russell Small Cap ETF (IWM): DOWN 4.53%, volume 197% ABOVE the average
::: SelflInvestors Leading Stocks :::
The Self Investors Leading Stocks Index is comprised of stocks in the Breakout Tracker, which is a database of the fastest growing companies near a breakout or having already broken out of a base. No surprise here – leading stocks got crushed.
Summary:
* Decliners led Advancers 425 to 11 (Wow! just 11 advancers today – I did double check my database to make sure there wasn’t some error. That is correct.)
* Advancers were up an average of 2.12% today, with volume 109% ABOVE average
* Decliners were down an average of 4.66% with volume 76% ABOVE average
* The total SI Leading Stocks Index was DOWN 4.49% today with volume 77% ABOVE the average
::: Where’s the Money Flowing :::
Many investing websites provide leading industries based on price performance alone. However, without accompanying volume levels, this can sometimes be misleading. The only way that I know of to gauge industry/sector strength WITH volume levels is through the analysis of ETF’s. A couple years ago this was not possible, but as more traders/investors use ETF’s they become a much better tool for guaging the health of the market and seeing where the money is flowing (or not flowing). Using the proprietary SelfInvestors Demand Indicator score which measures price and volume movements, I’m able to quickly see which sectors/industries are seeing the greatest inflows of cash. For a detailed look at how I go about gauging sector/industry strength please see the following post: http://investing.typepad.com/tradingstocks/2006/09/wheres_the_big_.html
* Current Leading Sectors/Industries (over last 30 trading days):
Utilities, Materials, Clean Energy, Gold
* Current Lagging Sectors/Industries (over last 30 trading days):
Retail, Global Dividend
* Today’s Market Moving Industries/Sectors (UP):
Just Bonds!
* Today’s Market Moving Industries/Sectors (DOWN):
Gold Miners, Clean Energy, Gold, Broker Dealers, Financial
::: Stocks :::
The stocks section will be an area where I highlight one stock selected from a group of stocks moving up with volume well above average and most likely breaking out of a base or consolidation.
NO Stock of the Day Today.