Distribution day hits Wall St.

Today’s distribution day marks the first distribution day since our follow through. Media is blaming the Iran situation and housing. The marekts have been under distribution because there hasn’t been a significant pull back since the initial bull market in ‘03 began! Bernanke’s testimony did little for stocks as he commented that the housing “crisis” is contained. At any rate, today marks the first day of distribution. We’ll need 4 more to signal a pending drop in stocks is near.

Bernanke calling the housing market contained is a bit apealing to me. Contained? Suggesting that an impending implosion in the housing market is contained and won’t happen? I hardly trust the fact that pockets of the real estate market that have a large amount of homes bought with subprime loans will be able stay a float. I’ve mentioned a few times to people that this reminds me of the 1929 market. During the roaring 20’s you were able to buy stock with as little as 5% down and sometimes 0% down!!! Demand for stocks started to slide and when margin calls were issued, people couldn’t pay! The housing market has displayed the same characteristics. If you are in an adjustable mortgage do your best and refinance NOW! Otherwise, try to sell and cut your loses.

How does this affect stocks? Consumer sentiment, 70% of the US economy is made up by consumers. If housing goes down the toilet you’ll see people reign in their wallets and halt spending. Now, has the market priced tis in yet? Most likely not, the market is forward looking but this impending crisis may be a bit too far for the market to see.

Still advocated a large cash position. If you are finding new buys, I would definitely keep them right around 1% of your total account size. Otherwise, you are risky too much in a market that has been under distribution!

GDP numbers will be released tomorrow. Bloomberg survey has economist looking for a annualized rate of 2.2%. If there is any weakness in the number and/or downward revisions from the prior number you may see traders hammer stocks down.

Best of luck out there!

Aloha and Happy Trading,
MS

marketspeculator@gmail.com