More great insights from Art Cashin. Yesterday he talked about the significance of the big Tom DeMark bearish call. Today, another respected voice he follows is sounding the alarm
Another Voice – Investors Business Daily runs a front page feature called “Market Pulse”. A feature of the Market Pulse is the “Current Outlook”. For weeks and weeks, each day the current outlook has been listed as “Market in confirmed uptrend”. Today, however, they shifted to “Uptrend under pressure”.
Here’s some of their thinking on that change:
An afternoon rebound erased much of the day’s loss. Still, Thursday’s action was enough to put the market’s uptrend under pressure.
The action was unsettling on two levels.
First, distribution can’t be argued away. A case of back-to-back distribution days for one or more indexes raises questions. This happened five times during uptrends in 2010. Four of those times, the market continued falling into a correction. In the fifth occurrence, the market shrugged off the distribution and resumed its uptrend.
The second troubling element was the action of leaders.
Some stocks that broke out recently are now back below ideal buy points. They include OpenTable, Wynn Resorts and EZCorp.
A bit later they reviewed yesterday’s action specifically and talked about possible tactics:
Also, the market struggled Thursday despite encouraging economic news. When they market shrugs off good news, it suggests the sellers are grabbing control.
Jobless-claims data came before the open. The figure was better than expected, but the market opened lower anyway. A report that China’s economy grew 10.3% in 2010 raised fears that China will hike interest rates further.
Later, existing-home sales and leading indicators proved stronger than expected. On the negative side, the Philadelphia manufacturing index was below estimates.
Among IBD’s 197 industry groups, five fell for every one that rose. Retailers did best. On the downside, technology and mining groups fell sharply.
With the uptrend under pressure, let caution be your bias. Cut all losses at 7% or 8%, or less if the action of your stocks is bad. If you have a small gain, consider taking it before it turns into a loss.
So, we have another respected market observer raising a caution flag. Verbum Sat Sapienti.