Market Under Pressure
Today we experienced distribution on the NYSE indices (S&P500, Dow, NYSE Composite). Distribution is defined as a drop in price on volume higher than the day before. Distribution is caused by money leaving the market. IBD typically rules out slight distribution where the price change is less than a 0.2% drop. We had a large drop today on higher volume.
Billy posted something earlier in the day about a distribution warning with the correct conclusion, distribution that follows on the heels of a follow-through day most often (80%) leads to a failed rally. IBD is aware of these statistics and put the market status as Market Under Pressure.
Waiting for leading stocks to set up proper bases is needed. At that time a follow-through day could possibly lead to a successful rally. There is little doubt that this could happen in the weeks ahead and possibly lead to a workable rally through the end of the year. I would still call this a bear market rally but some of them work and should be played.
I remain in cash in the CANSLIM portfolio. I own GLD and DGP, two positions I rotated out of at the top and reentered this morning sidestepping the drawdown. I paid attention to English Bob's post showing that Gold may have bounced off of its Midas support line.
Mike Scott
Cloverdale, CA