If there is ever such a thing as a
confirmed downtrend, something that is best determined in hindsight, then the current market action certainly qualifies. The
NASDAQ Composite became the first major index to bust 200-dma support. The
S&P 500 is right behind as it approaches the 200-dma which is barely visible on the chart below. Meanwhile, the
NYSE Composite and the small-cap
Russell 2000 continue streaking towards their own 200-dma as all the major market indexes posted at least lower closing lows in a clear and so far continued market downtrend. As we have said over the past two weeks, unless you are an active short-seller capable of exercising nimble and rapid judgement, cash is king.
On Wednesday we issued a Short-Sale Set-Ups report on four names,
Arm Holdings (ARM),
ASML Holdings (ASML),
Lam Research (LRCX) and
Nvidia (NVDA). At that time ARM and ASML were sitting at 20-dema resistance where they were in short-sale entry positions. They have now broken lower and below their 50-dmas which puts them in secondary short-sale positions just below the 50-day lines which would be used as covering guides. At the same time on Wednesday, LRCX and NVDA were sitting at 50-dma resistance and have since broken lower. Any rallies back up into 50-dma resistance would bring them into short-sale range again. If these continue lower then NVDA would trigger another short-sale entry if it should bust 200-dma support which sits just 1.6% below Friday's close.
There is no reason to be playing the long side of anything at the current time as forced selling sweeps away anything and everything that is not nailed down. If it can be used as a fungible source of cash/liquidity, then it is vulnerable. Again, unless one is skilled and nimble enough to handle the short side, cash remains king until further notice.
The
Market Direction Model (MDM) remains on a
SELL signal where it has been since February 27th.
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