The market got a jolt of good news from Apple Computer and set up stocks to open higher from the get go. Traders were falling over themselves to get a piece of the action as volume soared at the open. Unfortunately, the highs of the day were set at the open and the market would fail to see those highs again. Sellers took to the market, but not at a high rate allowing dip buyers to push the market back to the mid point of the trading range. The action got going with Ben Bernanke’s comments the economy was “unusually uncertain” it was all sellers needed. Volume picked up pace and traders sent the market lower. Crude oil went lower and the dollar raced higher with bond yields diving. Fear certainly appeared as the market closed just off its low with volume moving higher.
Another high volume failure at the 50dma for the major market averages, the second time in 4 days. Even the mighty Apple Computer could not escape the wrath of the market where the stock finished at its lows and below its 50dma. On a positive note, the silver lining was we were able to avoid taking out Tuesday’s low, but that is a small consolation prize.
Volume is now coming in on the downside and with big consequences. The failure to get back above the 50dma is a large red flag for this market and one should be taking precaution. I have pointed out the lack of POWER this market has had over the recent weeks like in a new uptrend. Successful new uptrends are accompanied with big volume moves with broad leaders. Stocks should be moving in groups, not just single stocks from one industry. Power is what we need to see to get long and so far we have yet to see POWER.
Cash still remains king, but if you have been long you might want to trim or cut your positions. If you are on margin GET OFF. This market is more suited for shorting than going long at this point. Unless, of course we get our power. We have plenty of short targets to take advantage of and with this market continuing to fail at important levels our probability of success grows. This market isn’t about to cough up a solid uptrend just yet and for now the large trend remains down.
Remember, cash is king and now it appears shorting is a close second. Always trade with a cut loss plan, it is the best insurance policy for your trading capital.
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Disclosure: Short ISRG