The stock market is experiencing high volume selling (a.k.a. Distribution) and a downward price violation of key moving averages in the main indexes today.
This type of negative action (expectation breaking) is exactly what we warned about in our post just a day ago when we wrote, “While our signal’s upgrade to green is encouraging, it is early. It will take a few more days of strong action to confirm it is the next leg up of the rally started in November. Keep in mind this new green signal could fail very quickly. Obviously, if the institutions begin to immediately sell (especially if there isn’t any significant volume boost to the upside within a few days) then it will prove to be a short-lived green signal (a fake-out).” As of Wednesday’s close, the volume did come in sharply lighter than the previous day. That suggested the rally wasn’t as powerful as is historically normal and set the stage for today’s sell-off.
As a result, our Current Market Outlook is being downgraded before the close to “Uptrend Under Pressure” with a yellow light. The TPM “Core Four” internal indicators are back to 2 green, 1 yellow and 1 red. The net result is a flip back to a cautionary tone with a yellow light. We continue to be defensively positioned in our strategies having only allocated a small amount back into the market over the past few days.
Please note that a glimmer of hope for the bulls remains as the S&P500 index is testing its all-important 50-day moving average. Having said that, if the index does indeed knife through that support level on higher volume and close under it soon, that would push another of our “Core Four” indicators to yellow and move closer to a “red” signal.
Interesting note: The last time we had an immediate negative signal reversal similar to this was exactly 1 year ago…right before the Covid collapse. Let’s hope it is different this time.
What should investors do now? Keep on your toes. Eschew complacency. Dust off your exit strategy in the event the next few days experience any vertical drops. While acting defensively, stay hopeful and build your watchlist.
Have a Triumphant day! ®
The information in this article is based on data obtained from recognized services and sources and is believed to be reliable. Any opinions, projections or recommendations in this report are subject to change without notice and are not intended as individual investment advice. Not to be used as legal or tax advice.
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