MLR - PMP 10/9/13
The major averages sank on debt ceiling nervousness on huge volume. The S&P 500 fell less as it has been in a downtrend for some time, but was still hit for a -1.2% loss on the day, putting it squarely under its 50-day moving average. The NASDAQ Composite, which had struggled to stay in a sloppy sideways pattern over the past couple of weeks, broke badly, down an even 2%, to finish at its 50-day moving average. Many leading NASDAQ names also got slammed after trading near their highs over the past few days as the action took on the appearance of frantic liquidation in many cases.
The Market Direction Model had sensed reluctance on the part of major averages to move higher, so that, together with a spike in volatility due to headline uncertainty, this pushed the MDM into a cash signal on Monday. The MDM will be watching the action of major indices and leading stocks for a clue that a floor is found in the coming days. Alternatively, should selling pressure increase, MDM may stay in the safety of cash or move to a sell signal, depending.
Futures are up this morning, due at least in part to yesterday's announcement that Janet Yellen, a noted Fed dove, would be nominated for the position of Fed Chairman, replacing current Fed Chairman Ben Bernanke in 2014.
Damage in many leaders has been severe, and generally this is a bearish sign for the market. Maintaining tight stops would have helped investors to avoid suffering through much of yesterday's carnage, and that continues to be the case as the market remains in its current state of affairs.
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