…is the IBD call. We were already at 8/9 distribution days in the Naz and S&P (in last 25 trading days), and while Monday’s rally felt great, the volume was not strong enough to make us belive the institutions were all in.
Both indexes’ price ranges Tuesday exceeded the prior day’s — a bearish behavior that’s known as an outside day. Even the more sedate Dow Jones industrial average suffered an outside day, down 1.4%. The small-cap Russell 2000 lost nearly 2%.
Not only did stocks fail to build on Monday’s strong gains, but selling returned in broad form. Declining stocks led advancers by nearly 11-to-5 on the NYSE and by about 10-to-3 on the Nasdaq. Volume eased on the Nasdaq and was higher on the NYSE.
Tuesday’s deflating action sharply contrast the lows on Feb. 9 and March 2, when the Nasdaq immediately followed up with continued gains and a Day 4 follow-through rally on Feb. 14, which confirmed a new uptrend in place.
So what’s next? The S&P 500 is nearing its 200-day moving average, where the index found support Friday and where a bottom is still possible. For its part, the Nasdaq will need to hold above the 7000 level. Will institutional investors come back into stocks?
This is OT, because this board does not worry about market direction. The stocks held here have outperormed the market in spectacular fashion, and it seems like that will continue. Fast growing revenues and small market caps (in many cases) keep demand high and supply low.
I love Saul’s all-in approach, it really forces one to focus on what stocks should be held, cut, and added to. If you want to buy a new stock, you have to justify it having more potential than a current stock. Very nice.
As Mark Twain said, “there’s nothing like a hanging to focus the mind”.