The market did not receive any economic updates today, but writing on the wall suggests further pain is likely to be upon us. Since the first week of March the market has been heading sidways and has been unable to make headway despite positive earnings reports. Weak economic data has certainly crept into the minds of traders. Stock market leaders have been breaking down as well giving a signal of extreme WARNING to market participants. Small cap stocks and the NASDAQ led the market lower closing near session lows another negative signal for the market. The long side of the market has no real edge, perhaps we do see an oversold bounce, but the likelyhood it produces a sustainable rally is extremely low. We continue to play defense and will wait for our opportunity to strike.
Leaders like BIDU and LULU continue to act REALLY weak. Their breakdowns aren’t the only ones. OPEN was a stock that HAD been the leading stock since the September follow-through day. It has broken down and continues to act terrible showing leaders continue to be dumped ahead of any major sell-off. Remember, leaders will be sold off first and then the general market will follow after the declines. NFLX and CMG are holding, but they are the exception and not the rule. Focus on the RULE and not the exception. Leaders continue to whisper, no yell there is more pain over the next 3-9 months. Be prepared.
Financial stocks continue to act REALLY weak. Today was no exception with the XLF dropping below $15. The ETF looks to be in free fall mode now. XLF has been weak since the highs seen in February when the ETF hit a high of 17.20. As of the close today the ETF is down 13.2% since the high and from the same time frame the S&P 500 is only down 4.3%. Financial stocks are certainly signaling further pain ahead even if we do see a sizeable bounce in the market.
Regardless of any kind of bounce we may get the chances it turns into anything sustainable is very little. Leaders are broken and the time to be long will come again, we just need to be patient!