Stocks were sold down pretty good today as most of the major indices were down over 1%. While not a drastic down move compared to recent years, it was the largest decline in the S&P500 since mid November. While I don’t think a top is necessarily in, we certainly have had signs of waning momentum. Price has continued to drift higher for sure, but if you pay close attention to $SPY, notice volume has drastically declined over the last few green sessions. This is in sharp contrast to the past two distribution days. In fact, the four highest volume days in the past twelve days have all been red. While price is still acting well overall despite today’s selling, volume is definitely hinting at some institutional selling.
While volume is certainly an important indicator to watch, there are other clues confirming that momentum has been declining under the markets hood. The percentage of stocks trading above their 40 day moving averages has actually been dropping steadily since peaking in January. This is certainly worth noting as it reveals a market being led by fewer and fewer stocks.
The McClellan Oscillator, a shorter term indicator, is also revealing a similar pattern. In fact, one could argue that it is almost oversold already, which is not typical with a market one day off fresh highs. There is definitely some distribution occurring, the question is whether it is signalling a pause or a top.
It is much too early to make any such conclusions. I would actually be surprised if the market experienced more than a drop of a few days right now as many participants have missed out on a large chunk of this move. However, I will paying close attention to what individual stocks continue to do. For a market to continue pressing higher, it needs expanding breadth, not contracting number of stocks making highs. If this behavior continues, I would expect we enter at least a mild correction that could take us to $SPY 146 in the next month or two, and possibly into the gap just under that.
Themes I’m Wacthing
Posted by downtowntrader on November 18th, 2012 at 10:37 pm, Comments: 0
I haven’t been writing much lately due to being swamped outside of trading. Trading comes first, and what little free time I’ve had has been [...]
Waiting for my pitch
Posted by downtowntrader on September 10th, 2012 at 10:37 pm, Comments: 0
I wrote a couple weeks ago about being long to the hilt and for the most part the market has remained pretty healthy. All the picks [...]
Long to the Hilt
Posted by downtowntrader on August 26th, 2012 at 10:53 pm, Comments: 0
I have a couple friends that shall remain nameless that have been looking for a market top the past few weeks. However, I have found [...]
Gold Clears 200-Day MA
Posted by downtowntrader on August 23rd, 2012 at 11:02 pm, Comments: 0
Gold as represented by the SPDR gold trust ETF (NYSEARCA:GLD), finally cleared its 200 day moving average today. I’ve mentioned the miners and gold a [...]
Using A Ratio Chart
Posted by downtowntrader on July 31st, 2012 at 12:22 am, Comments: 0
With $SPY- SPDR S&P 500 ETF(NYSEARCA:SPY) up so much in the past few days, I really didn’t find many charts that were actionable tonight. While overall there [...]
Talking My Book – Amazon.com, Inc.
Posted by downtowntrader on June 18th, 2012 at 12:38 am, Comments: 0
Despite what could be called an uneven performance last week by the indexes, there were actually a decent amount of individual stocks setting up ($MGAM, [...]
El Gato Muerto
Posted by downtowntrader on May 22nd, 2012 at 12:40 am, Comments: 0
I mentioned we were close to a bounce in the stock market last Thursday evening and it looks like that is in fact what is [...]
The Pending Bounce
Posted by downtowntrader on May 18th, 2012 at 12:13 am, Comments: 0
I mentioned a couple of nights ago that we had a good shot of bouncing within the week and I’m starting to see more signs [...]
13 Observations on this market
Posted by downtowntrader on May 15th, 2012 at 12:05 am, Comments: 0
I’ve been relatively quiet lately and a lot of that is due to the way the market has been trading. While I would love to [...]
Joey Fundora is a private trader who has been trading for over 8 years. Joey specializes in discretionary swing trading of stocks almost exclusively through the use of technical analysis. (More)