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Stumbling into the Weekend Stocks Close with Significant Losses

|Includes:DIA, DRV, ERY, IJR, IJT, IVE, iShares Russell Mid-Cap ETF (IWR), QID, QQQ, SOXS, SPY, SQQQ, TECS, TZA

Surprisingly good economic data kicked off the morning trading session. Chicago PMI and University of Michigan Confidence indexes came in much better than expected. The market pushed higher and looked as if the market was going to be close the morning gap. Sellers took to the market by noon time and didn’t let up even at the close. NYSE volume jumped due to a big rise at the end of the day, but volume slid over on the NASDAQ. Even more important our market leadership were hit hard and very hard a sign of significant weakness. Cash is king and this market remains treacherous signaling cash is the best place to be.

The number of Bulls week over week thinking the market will be higher 6 months out jumped back above 30% to 32.51%. A bit off last week’s level the number of AAII Bears remained above 40 ending the week at 46.80. Bears are still at high a level, but with bulls jumping back into the market it shows we aren’t at a significant turning point. When bulls cannot get behind a move off the lows it is a big tell the move has a good chance of working. Remember, we’ll need to see market leaders setting up and the market acting well. However, another confirming indication can be from sentiment.

Today’s close and overall action will call into question what kind of week we’ll have next week. Lots of traders will be glued to the opening of US Equity Futures on Sunday night. They won’t be watching NFL, but how much up or down the futures will open up. We have our short lines out there, it is important to have your stake. The current price and volume action has signaled us to be short and we aren’t so concerned where the market will open. If we get a huge gap down, this situation would be a game changer to us. For now, we are keeping it simple and we continue to monitor the situation.

It is clear this market is pricing in further pain. The reason why? Perhaps it’s Europe, Greece, the US Debt situation, or something else. To us, the why doesn’t matter to us only how the market reacts. Avoid clouding your judgment with noise from Wall Street.