Stock Market Outlook Worsens
The Nasdaq fell 0.7% and the S&P 500 1% as volume increased. The concerning issue is the increase of volume. Selling on high volume signifies heavy institutional selling. Volume was higher across the board so there was distribution on all the major averages. This brings the total to 6 on the SPY and 7 on the QQQ. This shows that institutional players are becoming more negative on the market as the high volume is on down days. From a technical standpoint, the stock indexes are beginning to live below their 50dma’s. Small caps are well beneath their 200dma’s. This too is not a positive for a healthy market.
Considering what started in the beginning of July now should be considered a market correction. We never know how bad a market correction can be. Contrarily, this is an early phases of this action and the Fed could certainly turn it around with more of an injection of QE forever.
On a slightly favorable basis..
1.The QQQ is finding support at the 50-day moving average. The Dow is still above the 200-day moving average. A break below this 200 EXMA is a line of demarcation.
The put-call volume ratio has hit levels that have been market bottoms this year.
Q2 S&P 500 earnings have improved over the previous periods.
With all of this said, Stocks currently have much risk unless the situation turns around. More so, income oriented ideas such as REITs and MLP’s seem to be pricing in interest rate increases.
I have exited all my longs back in the beginning of July. Currently I am short the SXE as well as long the VIXY. One must take it day by day. This situation can change very quickly depending on the Fed.
If you want to improve your trading I offer one on one private mentoring. Just email me at Andrew@Trendfollowingmentor.com
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