The NASDAQ’s current rally attempt remains intact, yet under heavy pressure. Since the follow-through day on 8/13, the NASDAQ has failed to reclaim its 50-DMA, which is proving to be solid resistance for the tech-heavy index.
Additionally, distribution days are beginning to pile up, not to mention, rallies up to this point have come on below average and declining volume.
Remember, a big distribution day occurred on 8/14, the day right after the NASDAQ followed through. Studies have shown there to be about a 95% chance that a follow-through day will fail when this happens. So, the recent action isn’t all that surprising.
Leading growth stocks sold off with the general market on Friday, although they remain in significantly better shape, which is exactly what we want to see. Nevertheless, until the headline risk and wild volatility abate, progress will likely be difficult at best.
So, continue to keep track of the strongest stocks in the strongest groups, with the best fundamentals. However, until we start to see clear evidence of strength and accumulation on the major indexes, we would keep exposure to a bare minimum, if not 100% cash.
The NASDAQ broke sharply below its 50-DMA on heavier volume Friday, after its feeble rally attempt failed to reclaim this key moving average earlier in the week.
The Russell 2000 broke sharply below its 200-DMA on heavier volume last Friday, after failing to reclaim this key long-term moving average earlier in the week.
The S&P 500 broke sharply below its 50-DMA as volume on the NYSE expanded Friday, after its feeble rally attempt failed to reclaim this key moving average earlier in the week.
The DOW broke sharply below its 50-DMA/65-EMA on heavier volume last Friday and barely managed to finish the session above its long-term 200-DMA.
Buy IONS on a big volume move through $70.85, with a sell stop at its 200-DMA. (Price Alert: $70.85)