Market Analysis and Summary
The major market averages sold off sharply, on heavier volume across the board yesterday and added further distribution to their counts. The count now stands at 5 days for the NASDAQ and 8 for the S&P 500. Unfortunately, broad leadership succumbed to the heavy selling in the general market. This was a notable change in character for these stocks, which have otherwise been extremely resilient in the face of general market weakness. We saw the same phenomenon occur a month ago, when the indexes cracked sharply lower on 9/9. Leading growth stocks started to break down with the indexes then as well, but quickly recovered.
It’s anyone’s guess, as to how long the market will take to sort itself out this time around. In the meantime, caution is advised. Initiating new positions is not recommended until things become more clear. Until then, pay close attention to rotation among the leaders. Healthy rotation is critical to the health and sustainability of the current uptrend. Also, keep close track of which leading stocks are holding up the best while the general market is in correction mode. These are the names that are most likely to lead the market higher when it turns up again.
The NASDAQ fell 1.54% on heavier volume, finished the session near its lows for the day and just barely above its 50-DMA, adding its 5th day of distribution.
The Russell 2000 tumbled 1.85% on heavier volume and finished well below its 50-DMA for the first time since the middle of September.
The S&P 500 fell 1.24% as volume on the NYSE expanded and closed well below its short-term uptrend line and 50-DMA.
The DOW fell 1.09% as volume expanded and closed well below its short-term uptrend line and 50-DMA.