The third day of distribution in the last four sessions has us hoisting the Red Flag for a Sell Bias. We’ve been prepared to do this for weeks as we’ve been calling for defensiveness with Long positions.
Our technical analysis tells us the 200-day moving averages for the major indexes will be tested next.
Our rational analysis reminds us the market does whatever it wants, when it wants. We may very well see a sharp rally to shake short sellers out, it happens quite a bit after a sell off and biases, like ours, shift.
Our pocket of strength in Growth Stocks poised to breakout has crumbled. Add in another round of distribution in the major indexes, we’re Bears now. But we’ll wait to see if we don’t get a strong reversal day Tuesday before hoisting the Red Flag.
Indexes are prone to trend-changing reversals when they test below key moving averages, as they are now.
An abundance of top Growth Stocks with bullish charts is a pocket of strength in this broader market correction. The stocks we’re adding today, in no particular order, are telling us the bigger picture Bull is far from being conquered. Stay tuned…
We’re watching leaders Apple (AAPL) and Amazon (AMZN) for indication of what may come for the broader market. Institutional grade selling for the two yesterday makes them vulnerable, with more of the same likely to lead to a significant leg down.
The Nasdaq has already hit its 50-day moving average. It may bounce in here as it flirts with the key technical support of a base breakout zone.
We expect the Dow and S&P 500 to also test their 50-day averages, which will happen sooner rather than later if leaders AAPL and AMZN continue to fall.
We’re holding a Buyer’s Caution bias. Trade what is, not what should be.