The major stock indexes failed to hold an intra-day rally today, with modest losses going into the close run on lower volume.
Officially, the Dow Industrials fell 1.0% on NYSE volume of 4.9 billion shares, while the NASDAQ dropped 0.7% on 2.1 billion. The leadership profile has flipped mildly positive, with 86 stocks making new highs versus 73 making new lows.
The short term momentum oscillators remain negative, confirming the bearish stance of the AlphaKing Trading Indicator. We have no new trades at this time, as we await a better entry opportunity to add to our short positions and inverse ETFs.
The stock market sits in the prime crash position deciding if it wants to pull-off a short term reprieve by rallying to test the 50 day moving averages (blue lines in charts below,) though any move to new lows would open the door to a four day crash run that would have 1987 implications written all over it. The fundamentals are certainly there for such technical potential to be delivered upon.
While we continue to expect the recovery rally attempt as the most likely scenario over the next few days, we caution investors to be wary of the crash potential, as all it would take to open the selling flood-gates for real would be one big down day, and such a big red one over the next day or so would be no surprise at all. We will continue to hold ½ a position short in our portfolios, though we would become very aggressive on the short side on any move closer to those 50 day moving averages. This week should be VERY interesting.
401K investors should be fully invested in a money market fund.
The Index portfolio is ¼ invested in the inverse ETF QID, which gives us a 50% exposure to the short side. Expect more trades over the next few days.
Kevin Wilde, Chief Trading Strategist AlphaKing.com.
