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Stocks Stumble as Volume Jumps; Small Caps Lead Stocks Lower

Dip buyers helped the market from closing on the lows as institutions stepped up pushing the market higher. Coming off of Monday’s rally on light volume the market wasn’t able to find buyers to push the market higher. Mixed economic reports did see Industrial Production tick higher, but it’s the only economic indicator showing any signs of strength. The market turned to its lows after the Sarkozy and Merkel meeting as nothing new came from the meeting. Volume picked up on the selling, it appeared institutions were again dumping stocks on the market. The subsequent rebound saw the volume run rate pull back after seeing a big jump after noon time. We did see a modest rebound, but with OPEX this week we are expecting to see intraday swings (not like last week). It is pretty obvious to us with a few market leaders taking it on the chin today we are churning our way lower.

It is all about the market leaders and then the market. We track market leaders and a few really had a tough day suffering some selling. A few did hold up, but it is not a good sign to see heavy volume selling on days like today. We still do not have a follow-through day in the market and continue to wait on confirmation, but with the way our leaders are acting I highly doubt we’ll even get confirmation. If we do get a confirmation, I am skeptical it will succeed. At this moment in time, all signs are pointing to lower prices for the market.

Last week we saw the number of AAII bulls increase more than the bears. Investors Intelligence survey still remains near very high bullish figures. This week it will be interesting to see if bulls continue to grow in this market action. If you pay attention to the market leaders you will have a better understanding of the true strength of the market. There is a divergence between market leaders and sentiment is an interesting development and one we should take notice. Remember, sentiment is not an “indicator” and is far from the “holy grail” of investing. It does help pointing to major market turns, a change in trend.

We could bounce around here for the next week or two, but the market will move lower. Don’t be a hero in this market, you will only be chopped up.