The market continues to show signs of fatigue. After the big run up on the first trading session of the week, all the major market indices ended the week with a loss.
On Friday, selling picked up in the last hour and an half of trading. There were talks the last minute selling is due to end of the month rebalancing. But whether it is rebalancing, the talk of end of QE-infinity, the selloff in
bonds, Japan/BOJ, Euro zone, or the passing asteroid (little sarcasm), the important thing is there was a selloff.
Since the DJIA made its new all time closing high on 5/28/13 at 15,409.39 without any other market indices confirming the new high, along with negative divergence from some of the market breadth indicators, the tone of the market has changed from complacent to a bit of apprehension. Although majority of the market participants are still considering the pending pullback is the long overdue correction, one should not participate in the next round of buy-the-dip. Instead, wait until the market has re-affirm the uptrend by having the DJIA closed with another new all time high with confirmation.
As the stock market review video below shows, the DJIA could be heading down to test the support level between 14,830-14,860, and the DJT needs to hold the support near 6232 where its 50 SMA current stationed. The SP500 could possibly test for support near 1597. and the Nasdaq 100 could work itself down to fill the 2911-2937 gap. Finally, the support level for the Russell 2000 could be the 954 level near its 50 SMA.
Click here to view the video if you do not see a video player on your screen.
Remember the 80/20 rule; approximately 80% of the stocks follow the direction of the market. Therefore, as the market is in the state of flux, trade cautiously. When in doubt, stay in cash.
