Market breaking down??

I sensed today that the mkt may finally be starting to break down. Great earnings all week and SPY's couldn't make any headway. Now bad earnings coming out and stocks getting hit hard. Alot of strong sectors broke down this week already (I.E. Home builders and health care). SOX hasn't yet but it may get its tomorrow with QLGC down $3+. Notice NVDA was leading nasdaq on the way up and it is poised for technical breakdown tomorrow. China dotcom's looking tired. Not seeing much pull back in biotech yet. Next 5 trading days will be more exciting than the past 6 weeks. Just a hunch.

I don't see much downside however. I'm looking for a retest of 965 on SPX very soon and a late summer bottom around 935.

Mkt feels like it has been distributing last 6 weeks. Anyone else see this?

 

Honestly I don't see any signs the market has been distributing the last six weeks. It's powered higher, but the big winners have been the most speculative sectors. To me that looks like a momentum or liquidity driven advance rather than one based on earnings or economic recovery.

We are overdue for a pullback, but I tend to agree it should be rather mild, absent some external disaster. A lot of money has a huge vested interest in the market going higher, and they can make themselves right in the short run.

 

This is a very eloquent and accurate statement, IMO.

 

I don't know about the next five days... Don't forget this is option expiration week.

 

Many of the very best tech/biotech/semi stocks look like they're about to break down into "stage III and/or IV". There's lower than avg volume and many of them have collapsed onto their 15 day ma. For the last few months the buyers always jump in at the last minute and bump things up. But how long before psychology kicks in because so many issues can't break out (and the SPY can't even break out) and everyone gives up for a few weeks?

 

Hi AAAintheBeltway,

how can you tell that there is (no) distribution?
I haven't even found a proper definition of it. Can you recommend a book on that?

Thanks LS

 

I hope so, because I wrote some SOX call options around 450.

 

My comment was more gut feel than analysis. Investors Daily tracks distribution days, which I believe they define as 1% or greater loss on increased volume. Before this past week there had only been one such day in a few weeks, as I recall.

Willaim O'Neill's book has a lot on this subject. Highly recommended.

 

There is a nice double top on the SP daily chart. I think the downtrend is about to resume after this crazy little rally.

 

http://www.zealllc.com/2003/echo.htm


some really good charts in there!