First off, we don’t know why but just about every Monday has seen a mystery gap to the upside in the market.
But the name of the game is more deterioration in the market. We’ll just report the facts!
Before this past week, the market was about 50-50 in our proprietary scan. We think it is more like 40-60 now. This is a pitiful number considering we are just a few percent off the highs.
On top of that, new yearly lows have outpaced yearly highs just about every day. Again, this should not be happening just a few percent off of highs.
The RUSSELL 2000 (don’t worry, it is only 2,000 stocks) is now entrenched below the longer-term 200 day moving average. We have been telling you to underweight small caps versus large for months.
The TRANSPORTS continue to act poorly and now also trade below the 200 day.
The S&P, NASDAQ, NDX all trade below short term support, the 50 day average.
REGIONAL BANKS (KRE) are trading below the 200 day and are now testing vital support at around the $51 area.
INDUSTRIALS (XLI)…HEALTHCARE (XLV)…MATERIALS (XLB) now trade below the 50 day.
JUNK BONDS (JNK,HYG) trade at longer term support after breaking short term support.
And let’s just say more and more names continue to head south while fewer and fewer names are working. At the very least, the market is a tougher proposition. But until major…and we mean major support gets taken out, do not get too bearish. Just know 60% of the market aint happening. We have been listing those areas for you for months. Just staying out of areas we told you to avoid like ENERGY/OIL &GAS, RETAIL and others have saved a ton. And amazingly, those areas are not getting any better.
Watching that 1335-1340 are for the RUSSELL.
Watching the 2400 area for the S&P (the big breakout area)
Watching 6080-6100 area on the NASDAQ.
Bullish markets do not die easily. They are a long process where more and more areas break down and fewer and fewer areas are working. Eventually, under the weight of the ugly, major indices cave in. We do not believe we are there yet but any more weakness will not help the cause. Back in 07, it took many months of deterioration in the average stock as well as the major negative divergence in the FINANCIALS that eventually killed the market. Stay tuned. Central banks are still at the ready. The ECB gave another b.s. excuse last week to keep printing money and keep rates negative. The excuse: the Euro would strengthen too much if they tightened. We think they are full of it. They know what would happen if they stopped printing and buying up assets.