Saturday, March 7, 2015

Stocks Ride A Painted Pony

The Market Trend Model (http://bitly.com/M_Trend_Model) moved to a negative bias during the week with the S&P 500 first indicating a trend change on Wednesday. Then on the following day both the Nasdaq-100 and the Russell 2000 indicated trend changes as well.  Yet despite the end of week selling in all of the major indexes, the Nasdaq is still clinging on to its upward trend. However, without a substantial rally on Monday the Nasdaq appears it too will fall into a confirmed downtrend.

Selling intensified at the end of the week and it was not limited to just stocks, as commodities were crushed as well.  Gold saw a -3.75% weekly decline and silver a -3.92% weekly decline.  And while crude oil saw a +0.53% weekly advance, it closed -5.0% below its midweek high set on Thursday. The bearish reversal closed oil just below its 10-week moving average and may indicate its January low of 43.58 will be tested sooner than later (http://scharts.co/1zO27pT).

At the moment a fair amount of selling would seem to be healthy for the market as overbought levels are worked down and profits are taken.  What remains to be seen is if the selling begets more selling and this is the beginning of a more pronounced and protracted correction.  Caution and patience is warranted as this bout of selling plays out.  As always, remain mindful of all possible outcomes.