Broad Selloff Hits Hardest In Biotech and Silver

Nick Perry (Schaeffer's Investment Research) submits: Last week we saw that the upside momentum was slowing a bit and this week we find an outright selloff:

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More than 90 percent of my list was lower this week as concerns about both overseas markets and our economy knocked the market lower. I am sure everyone is already well aware of Tuesday's 400 point loss on the Dow Jones Industrial Average (DJIA) so I won't rehash that news. The impact of that drop though can be seen throughout the sectors I track.

The iShares Lehman 20+ Year Bond (TLT) and US Oil Fund (USO) were the top performers this week as every "stock-based" ETF on my list showed a loss on the week. Silver was hit particularly hard as the iShares Silver Trust (SLV) plunged more than 10 percent. In last week's column I noted the chart of the SLV and pointed to potential support. As you can see in the charts posted at the bottom of the page, the fund plunged straight through that zone.

One of the points that I found interesting was that gold was not near the top of the list, but instead on the lower half. The streetTRACKS Gold (GLD) lost just over six percent as it was hit with the rest of the market. There used to be a time when gold was considered a hedge against stock market declines but that clearly wasn't the case on this pullback.

As far as my overall takeaways from this week, it strikes me that the action was more macro-based than sector specific. Not only did nearly every fund on my list lose ground but 70 percent lost at least four percent. In my column two weeks ago, I talked about how it seemed that traders were gravitating toward momentum type trades - this is the flip side to that sort of environment. Given the broad-based selling, I think it is important to talk about the overall market trends:

Each chart features the 50-day moving average and a 9-day relative strength index (RSI). I use the moving average (the green line) as a simple way to gauge trends and the RSI (red line below the price) suggests whether the ETF is overbought or oversold. (More information about using the RSI can be found here.)

Index performance this week: