Stocks Begin to Look Tired

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A new round of bad news emerging from the Nations largest banks, in particular Citigroup announcing more to come with write downs. Traders sold off stocks to begin the day, NASDAQ opening down more than 1.2%. By the end of the day, stocks had trimmed most of the days losses. Volume fell across the board, the first time volume was significantly (10% or more) less than the previous day on a down day. Small and Mid Cap stocks continue to feel the brunt of the selling. As we move further with this 5+ year bull market stocks will continually look weak!

There is no question that the indicies are showing signs of major distribution. IBD pointed out their ratings in today’s “The Big Picture.” However, Monday’s trade for the first time in a long time (my memory) that stocks did not accelerate price wise to the downside with volume. One day does not make a trend and I would want to see the indexes bounce back Tuesday with strong gains on volume.

Back in July we saw the % of stocks over their 200dma at 70% . At that time most believed that to be frothy and signaling a top. Fast forward to now here are the #s:

Stocks over their 200dma: 38%
Stocks over their 50dma: 39%
Stocks over their 20dma: 29% – (I personally do not use this moving average but this if for illustration purposes)

As you can see we are seeing levels that do not appear frothy. Now, these are not end all be all numbers but food for thought; are we that weak? That isn’t to say we can see those numbers go to 0 but at this point in time stocks do not appear to be frohty as a whole.

My mindset at the moment is that we are approaching the pinnacle of the market. Did we just see a top last week? We could have but we need to see the indexes start to roll over to conclude much of anything. We have moved to the downside on the very near term trend, I would like to see the primary trend to turn negative to really start talking about a top.

Keep those losses small!

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