Wrap

Today the financials took the lead and were up 1.65% compared to an average gain in the market of about .30% A quick browse through the financial charts show many starting to roll over a bit, but there were also quite a few that posted solid gains on rising volume which opens up the possibility of a follow through day, at least in the early going, unless the Euro corrects substantially overnight. There could be an opportunity in some banking names or just financial ETFs, if you are able to buy and sell the same day, as it may not last too long. It does take time to distribute the gains in some of these stocks that closed well, so I'd expect the financials to outperform tomorrow, but probably not to the same extent as today and this is why I say the opportunity may be early and fast fading into the afternoon.

The bottom line from the pundits today is that the market hasn't decided how it feels about the tax cut surprise that knocked the market down Tuesday, but suddenly the market changed it's mind on Wednesday. I have a feeling that Tuesday was a hard hit that wasn't expected combined with the bond vigilantes, which took a breather today, I believe it allowed some losses from Tuesday to be made up today.

I'm adding a couple of very speculative trades, these are not long term or even swing trades, but trades that you may realize a quick gain and should be quick to take it if it materializes, they also should not be big trades, that's why I say speculative. You'll find them on today's list on the spread sheet highlighted in red.

 BAC is one trade that has been trending well for awhile, but it's recent failure to make a lower low wold have me booking profits for now. It can always be reentered later. It hasn't hit the stop, but I just have a gut feeling on it, if you realized decent profits from the extended trend, I'd consider booking them.

As for the market, there are more then just 3C negative divergences, there are divergences in MACD, RSI and quite a few lesser known indicators I combed through tonight. Then I decided to check breadth as it's been awhile since I did and I've been maintaining the theory that despite the apparent highs in the market, there's a bit of illusion as the highs are in the indices. However, the market is not 3 averages, it's  a market of stocks and as I have been maintaining, the market of stocks is tanking while the averages give a false impression which is a good reason not to focus so much on the averages, but rather the good trades that are out there as the market of stocks is declining, despite the 3 averages.

Here's the impartial facts...

The green line is the indicator, the red line is the comparison between either all of the NYSE listed stocks or specific averages the indicator measures.

 Percent of stocks that are 1 standard deviation above their 40 day moving average-that would mean they are trending higher then their 40 day moving average by at least 1 deviation-the strong stocks. Luckily in red, the NYSE, we can measure between two almost exact same price points. In November that % of stocks was 65%-pretty strong, now it's 45%- or in other words at the same price level 20% less stocks are above that 40 day moving average by a standard deviation. Or in plain English, 20% less strong stocks now as compared to a month ago.

 Percent of stocks trading 2 standard deviations above their 40 day moving average-these are even stronger stocks that have run way above their moving averages. In November it was 45% of stocks, now half that, 22%!

 Percent of stocks just trading above their 40 day moving average, in October at lower prices it was near 90%, now 60%

 Percent of stocks trading above their longer term 200 day moving average, was 90%, now 75%

 Percent of stocks 1 standard deviation below their 200 day moving average, these are stocks that are trending down, below their long term moving average or are in bear markets. They were about 5%, very few, that number has almost tripled.

 Percent of stocks 1 channel above their 200 day moving average-lost over 10% of stocks

 Percent of stocks 2 standard deviation above their 200 day moving average went from 40% to 29%

 Percent of stocks 2 standard deviations BELOW their 200 day moving average, these are stocks in big trouble, went from about 3% to double that.

Stocks making new highs/new lows over 13 weeks period, what is interesting is the number went from 90% to 67% in ONE DAY! That would be today. The calculation is new highs-new lows, the lower the number the more stocks making new lows.

So there it is, pretty much what I've been saying. The averages portray the stock market, but these charts portray the market of stocks and in my opinion, being long right now with these kinds of numbers is like holding a hand grenade as long as you can for maximum gains and hoping you throw it before it goes off. Being short the right stocks is not trading against the trend, the trend is clearly falling apart.