We witnessed our second major distribution day as the DOW was down 2.6% on volume 40% larger than the prior trading day. The NASDAQ was down 2.6% on volume 15% larger than Thursday.
It was the worst selloff for the NASDAQ since February and the largest for the DOW since August. Volume surged across all major indexes but do keep in mind that it was options expiration day.
Technically speaking, we now have 4 distribution days for the NASDAQ and 3 for the DOW over the past month. It’s now time to start focusing big-time on the market leaders to see where they are going to take this market. If they start to roll over, you better be quick to take profits and even quicker to take losses.
Here’s what I had to say last Thursday, October 11, 2007 (see the charts in this link as well: Distribution Day)
The number of stocks above their 50-day moving averages crossed above the overbought level of 80 last week and we saw our first major sell-off distribution day yesterday. This doesn’t mean you must rush today to sell all of your holdings but do understand that the next sell-off is not far from happening. Study the chart below and follow the purple line to see where and when the market had peaks and valleys as related to the number of stocks on the S&P 500 above or below their respective 50-day moving averages.
The markets flashed a heavy distribution day Thursday as the NASDAQ was down 1.4% on volume 60% larger than the previous day. This was the largest showing of volume in two months and is not healthy because it was pure distribution. It was only the second distribution day over the past month so we can’t call this a bear run but please be on the lookout for a possible correction of 5%-10%. Technology stocks led the decline as BIDU gave back 10% of its amazing run.
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