Stocks Tank As Correction Take Hold

ByAdam Sarhan

The market is currently in a correction which, according to historical precedent, suggests 3 out of 4 stocks will follow the market lower until a new follow-through day emerges. That said, taking the appropriate action on a case-by-case basis with your stocks prompts investors to raise cash when any holdings start getting in trouble. It is also important to note that the major averages have experienced multiple “corrections” since the March 2009 lows and each one has been mild at best (less than a -10% decline from the recent high). Therefore, it will be very interesting to see how low this correction goes before the bulls show up and defend support. Additionally, it is important to note that the market can go much lower (or higher) than anyone thinks; so it is of the utmost importance to filter out the “noise” and carefully analyze price and volume action of the major average for the best read on the health of the market.

Stocks Tank On Contagion Woes

ByAdam Sarhan

Over the past two weeks, this column has consistently mentioned that the major averages have been steadily rallying since early February and a pullback of some sort should be expected. Furthermore, we mentioned that the current rally was under pressure due to the disturbing number of distribution days that emerged in recent weeks. So, we hope that Tuesday’s sell off (and any further downside action in the near term) should not take any of you by surprise. Trade accordingly.

Volatile Week On Wall Street

ByAdam Sarhan

It is important to note that the major averages have been steadily rallying since early February and a pullback of some sort should be expected. Tuesday marked the latest distribution day since the rally was confirmed on the March 1, 2010 follow-through day (FTD). According to the paper, there are 5 distribution days for the NYSE and the S&P 500, 4 for the Dow, and 3 for the Nasdaq in recent weeks. This puts some pressure on this 9-week rally, but has yet to cause any technical damage. However, the fact that the market continues to shrug off any and all negative data bodes very well for this 9-week rally.