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Stocks Fold to Selling Pressure as Heavy Volume Blankets the Market

Positive economic news from the ISM group helped boost stocks around 10am EDT.  It appeared all was well with stocks with positive news coming from the manufacturing sector.  However, institutional selling took hold and quickly reversed stocks from very nice gains into NASTY losses.  Volume was tremendous all day long as rumors of bank failures crept through trading desks on Wall Street.  Leading stocks were battered as well as the appetite for fundamentally sound growth stocks continue to be non-existent.  The day notched a distribution day for all indexes and pushing the count for the Dow Jones Industrial Average to 6 days.  This could spark the market to continue to sell-off or we could find support, but it is certainly time to be cautious.

From an economic stand point it appears we are stabilizing the economy, it just has taken a bit longer due to the government intervention.  Allowing the natural process of unwinding to occur would have been very traumatic, but been the right thing to do.  Assets with value would have been purchases while the bad would have been written off.  Regardless of what would have been the right hing to do we are seeing stabilization.  Stocks on the other hand were finding a reason to sell off and found good news to do it in.  Therefore any weak holdings must be sold off to avoid anything more damage to the downside.

On of two things could be happening here at the moment; one being we are seeing the beginning of a nasty correction or two we are seeing rotation out of the stocks who were beaten up in the 2008 bear market into cash.  The stalling days we pointed out last week were a tell that this market was going to have a difficult time moving higher.  However, the support that stocks received late day did offer a shed of hope we'd be able to hold.  In the end, we broke lower on HEAVY volume indicating institutional sellers were unloading shares and we are not going to fight the big boys.

At some point leading growth stocks will emerge, but it may take time.  Some traders are able to sit in cash and wait for that time.  Others feel the need to be in the market.  Cash is a perfectly good spot to be in as you are only missing the "poop" stocks move.  The likes of AIG, CIT, C, FRE, FNM are simply lottery tickets and just so happen to be leading this market.  It is quite logical as these stocks were sold unmereciously and when armageddon was avoided they now are repricing in the future state.  This market isn't going to cough up Monster Stocks just yet, it may take another quarter or two to really begin to see these type of stocks form.  Until then, if you need to be in the market we are certainly find the ones that are moving.

Until tomorrow, remember to keep those losses short and that positive attitude!

Video one for FREE/SILV members is available.
The video is 20 minutes long but due to YouTube it will only make it to the 11 minute mark. The full size 20 minute video is available in the forums for GOLD/PLAT subscribers. Aloha and keep a positive attitude out there!! :)