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October 28, 2009


The above image is from Pritchett Cartoons (we paid for it unlike some others), one of our favorite cartoonists. The image is appropriate given today’s action. A decline like this is something many, including us, have felt likely if only in our bones but for other reasons as well. Aside from obvious issues articulated by many already (no growth in jobs, high PEs, stock rally ahead of itself and so forth), we just didn’t like the pattern of high volume (distribution) on down days and extraordinarily low volume on rallies. We’ve been pointing this out ad nauseum.

But, that said, we’ve seen this pattern of selling repeatedly since May—heavy selling followed by light volume dip buying. For many bulls, defending the 50-day moving average is important. SPY for one, fell below that level today.

Below is the summary often done for us by subscriber and now and again contributor David Hurwitz. He eliminates Berkshire (NYSE:BRK.A) stock activity to compute his data since it presents, in his opinion, a more accurate picture. You can see we almost had from all market views a 10/90 negative day for the NYSE.

Below is the data from the WSJ including the NASDAQ/AMEX.

click to enlarge

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Source: Thursday Outlook: A Long-Awaited Sell-Off