Saturday, January 3, 2015

Santa Has Left The Building

The Market Trend Model ( moved to a negative bias when the end of year selling continued into the new year. The Nasdaq-100 is especially negative after recording four consecutive distribution days. The Nasdaq, the S&P 500, and the Russell 2000 have each recorded two distribution days in the past week. The Russell 2000 has managed to hang on to its uptrend, yet any additional selling pressure on Monday will place this index into a negative bias as well.

Even more concerning than the market index performance this week is the performance of leading stocks. Many recent breakouts have failed with sharp reversals occurring during the past two trading days. And just to make things interesting, on Friday many biotech stocks moved higher with expanding volume.

After the December v-shaped rally, the general market simply returned back to the November highs. Currently it appears the general market has formed a "double top" and lower prices may be on the horizon. As famed stock trader Dan Zanger tweeted on Friday, "Since QE has ended, we have witnessed a market with very little if any directional power."

At this moment it appears that Santa Clause has left the building and risk is much higher going into next week. Once again it is prudent for momentum traders to remain patient until the dust settles.