Market Analysis and Summary
The NASDAQ and S&P 500 rolled over and joined the Russell 2000 below their 50-DMA’s yesterday. Meanwhile, the Russell 2000 continued to fall and is now trading just slightly above its long-term 200-DMA. The DOW fell over 200 points, but closed above its 21-DMA. The distribution count now stands at 7 days on the NASDAQ and 3 on the S&P 500.
Leading growth stocks suffered the worst damage we’ve seen in awhile yesterday. The selling was widespread across all the market’s leading industry groups, which was a clear sign to continue backing away, down to a bare minimum if you hadn’t done so already. Other than well bought positions that have generated enough profits to handle a potentially deeper correction from here, cash is king while we wait to see how things unfold. Keep a close eye on the action of the leaders. They will tell us all we need to know.
Sentiment indicators like the put/call ratio and VIX spiked yesterday and closed near extreme levels. Also, the McClellan Oscillator is getting very oversold. While all these indicators could easily get even more extreme, active traders should be very careful getting short at these levels.
The NASDAQ cratered 2.13% on heavier volume and added its 3rd consecutive distribution day.
The Russell 2000 dropped 1.75% on heavier volume and found support on top of it long-term 200-DMA.
The S&P 500 fell 1.48% as volume on the NYSE expanded and closed below its 50-DMA. This brings its distribution count to 3 days.
The DOW fell 0.93% on heavier volume, but halted its decline above its 21-DMA.