The stock market started strong again on Tuesday with the Dow moving up about 45 points in the early going. This move had zero follow through and about an hour into the session it dropped about 45 points in five minutes and spent the rest of the day doing basically nothing. It did drop a bit into the late afternoon but managed to rally into the close but the sell off left it down over 50 points, with the other indexes down too.
This post should read a lot like the post two days ago when we had the last outside down day. Tuesday’s trading in the Dow produced an outside down day again (barely), with just one trading day in between. That in between day was a Monday, a dull day indeed. This type of trading is significantly bearish given the volume accompanies the move. Tuesday’s volume was slightly higher than Friday’s but Friday’s was a little more negative with less upside volume and more downside volume than Tuesday.
Tuesday’s trading in the Dow allowed that index to drop below its 50 day SMA but it managed to rally above it by the end of the session. Dropping below a rising 50 day SMA is not all that bearish because the trend is still up in that situation but the rest of the indicators are showing weakness as well. Add all of this up and you start seeing a pattern of bearish behavior.
Our favorite index, the NASDAQ 100 (NDX), has been struggling over the past month to follow the lead of the broader averages to break to new relative highs. Friday’s key reversal, followed by Tuesday’s reversal, brings this index down near 1700 again, a place that it has enjoyed being over the past several months. The 50 day SMA for the NDX has been flat to down over the past two weeks and this index is ready to lead the market down.
Be careful out there… be extremely careful.
Dow Industrials: 11,089.63 -51.70
RYVNX: 18.29
RYAIX: 21.83
TLT: 85.56
BEGBX: 12.91
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