Breadth data was bearish Monday, misleading investors focused on headline index advances. But there was nothing deceiving about Tuesday.
We’ve been discussing ongoing “distribution” in markets for some time now. When the major negatives [the dollar decline, subprime issues and so forth] overhanging markets surface, markets sell-off. When these issues recede market indexes have risen, but at the same time smart money has been selling.
So we got another dose of credit market and dollar problems, and heavy selling was the result.
An open hole can become an open wound. We’ve had many sharp and abrupt market sell-offs beginning with the end of February decline. Every time bulls viewed the carnage as a buying opportunity. Why should this time be any different? There are many reasons to believe it will, but most bears felt that way previously only to be undone by subsequent rallies.
Disclaimer: Among other issues the ETF Digest maintains long or short positions in: S&P 500 Index (SPY), NASDAQ 100 Trust Shares ETF (QQQQ), iShares Goldman Sachs Technology Index Fund (IGM), PowerShares DB US Dollar Index Bearish (UDN), streetTRACKS Gold Trust ETF (GLD), Market Vectors Gold Miners ETF (GDX), Rydex S&P Equal Weight Consumer Discretionary ETF (RCD), streetTRACKS KBW Bank (KBE), Financial Select Sector SPDR ETF (XLF), iShares MSCI Brazil Index ETF (EWZ), Market Vector Russia ETF Trust (RSX), iPath MSCI India ETN (INP) and iShares Trust FTSE-Xinhua China 25 Index Fund (FXI).