It’s Not What You Think

Nothing in the charts suggests the market is altering its latest southern course.

Semiconductors have been the bellwether to this correction, which is typical. We might expect to see them reverse course ahead of the broader market.

The 200-day moving averages are the next downside targets for the major indexes.

Stay defensive. If the bull returns we’ll expect to see a whole new set of charts to ride along with the wave.

All the thinking and anticipating in the world doesn’t matter when you’re dealing with Mr. Market, who will always try to surprise.

Red Flag Finish

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.

Never be surprised by the market.

Crumbling Cookies

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.

Big Fat D

A major round distribution for the Nasdaq, and a less intensive one for the S&P 500, means we’re not  confident for the upside potential of this market.

We don’t lower our bias to Sell unless we see another day of it.

Not much more needs to be said here. Institutions spoke for themselves today. No amount of market opinion molded by naive journalists (mostly naive that is) will change our opinion.

Keep it simple, keep it profitable.

Tech Threat

With the Dow and S&P 500 just a good upside day away from new highs, it’s the tech-laden Nasdaq that flounders and threatens all as it trades under its 50-day moving average.

The downtrend in Semiconductors ($SOX) is the biggest dragas its 20-day moving average slopes south of its 50-day line, with its 50-day trending below its 200-day.

Meanwhile, expect  earnings season to cause turbulence.

If it weren’t for strength in recent and potential breakouts we’d be bears.

Reflex

The major indexes are bouncing off their 50-day moving averages in what appears to be a show of decent strength as an accumulation day suggests heavy players are on board.

Meanwhile, leadership from the likes of Apple (AAPL) and Amazon.com (AMZN) has been mostly flat in this broad reflexive move.

We’re sticking with our Yellow Flag, Buyer’s Caution bias. There’s not enough evidence to really place an attractive bet toward either direction in this market.

Leadership Down

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.