Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
The problem with such a run without rest is once the trend breaks we have big air pockets in the charts. I’ve been waiting for the 20 day moving averages to break on the NASDAQ and S&P 500, which finally happened today – but now it’s no man’s land as we have gaping chasms between the 20 day and 50 day moving averages.
The market did put in a small rally at the close led by the semiconductor groups as someone ran into Intel (INTC) all afternoon, and of course (wait for it) Apple. But breadth was horrid and small caps stunk again. The Russell 2000 is now firmly below the 50 day moving average.
The strength remains in the “Q’s” which is 20% Apple and a bunch of other big cap tech stocks people continue to hide in. This popular ETF still holds its 20 day moving average. Somehow one would believe at some point in 2012 this simple trade of buying the same 5-6 big cap tech stocks is going to lead to pain for those who are employing it. It has been a narrowing market since late January, and has become even more so in the past week.
Anything can happen day to day, so for all I know, we rally 2% tomorrow (the gap down we had this morning certainly could be filled quickly) but it does not change the fact the complexion changed today even for the big caps whereas it’s been a rough 4 weeks for the small caps who have did nothing in February post the employment report, and in the past week have taken on a lot damage. The R2K is already down 5% from highs.
There is much more damage in individual charts than in the indexes at this time – a whole host of compelling charts from a week ago now in just a span of 3-4 sessions have turned very sour.
p.s. first 1% pullback on the S&P 500 in 2012.
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Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
