Day 3: The Selling Continues

Thursday, August 12, 2010
Stock Market Commentary:

Stocks ended lower for a third straight day after jobless claims rose and the latest round of Q2 earnings fell short of analysts’ estimates. Volume totals were reported lower on the NYSE and on the Nasdaq exchanges versus the prior session which was a somewhat welcoming sign. Decliners led advancers by over an 11-to-8 ratio on the NYSE and by a 16-to-11 ratio on the Nasdaq exchange. New 52-week highs easily outnumbered new 52-week lows on the NYSE but trailed new lows by a large margin on the Nasdaq exchange. There were only 3 high-ranked companies from the CANSLIM.net Leaders List made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, one more than the 2 issues that appeared on the prior session.

Jobless Claims & Sour Tech Results Weigh on Stocks: 

US stocks fell but ended near their intraday highs after the Labor Department said unemployment claims unexpectedly rose to the highest level in five months and several well-known tech stocks got whacked after Cisco Systems (CSCO -9.99%) released their Q2 results. The uptick in jobless claims was the latest in a series of tepid economic reports released this week which sparked concerns that the global economic recovery will slow in the latter half of the year. Cisco, the world’s largest manufacturer of networking equipment, plunged nearly -10% after sales fell short of analysts’ estimates. The sour outlook weighed on the Nasdaq 100 where many high profile tech stocks reside. 

Market Action- Uptrend Under Pressure:

The technical action in the major averages has deteriorated significantly.  Not all of the major averages managed to rally above their recent chart highs, and all have now sliced back below their respective 200-day moving average (DMA) lines. It is also worrisome to see the number of distribution days pile up in recent weeks which puts pressure on the current five-week rally.  Whenever a market rally becomes under pressure (as it is now), it is usually wise to err on the side of caution and adopt a strong defensive stance until the bulls regain control. Trade accordingly. 

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