Stocks Take a Spill

Stocks finally made good on growing internal weakness and tumbled on Monday.

The slide wiped out most of last week's gains, and may be the start of something serious. However, in truth it's too early to tell, as both the indexes and leading stocks remain in strong uptrends.

As you'd expect on a red candle day, market internals were poor. 7 stocks fell for every 3 that went up, and 8 out of every 10 shares traded was a sell. New Highs hung tough at 400, but the ratio over New Lows slipped to about 3-to-1.

NYSE volume accelerated 14%, marking a clear distribution day for the blue chip exchange. However, one surprising feature of Monday's session was the lack of NASDAQ volume. While the Composite slid a hefty 32 points, volume was just 0.06% higher than Friday (not even 1/10th of a percent). The NDX had a similar price move, but volume actually fell!

Many stocks saw their bids pulled in the afternoon, leaving them to slide lower on surprisingly light volume. For example, tech stocks such as INTC, GOOG, AAPL, FLEX, BEAS, RIMM, QCOM and dozens of others slipped on low trade. The Transports also fell on low volume, easily seen in leaders such as PCAR, EXPD and CHRW. In all, just 16 stocks on the NDX printed distribution days, an unusually low number for a 1.2% decline.

The IBD100 had a bad day, but certainly no worse than its peers. While the RUT fell 1.8%, the small-cap heavy IBD100 slipped 1.9%. About 1/3 of the IBD100 printed distribution days, the same as the Dow.

How far will the Composite slide? A trip down to the 50-day/Fib 62 would be a 3.5% pullback from Friday's high. For the record, a 10% correction literally takes us off the chart to about 2300. Regardless, the odds favor more downside ahead.







NASI is one of the original poor-man timing indicators, and SAR flipped to a Sell on Monday.







While the selling lacked intensity, it certainly was widespread. Every sector did poorly, though a continuing surprise is the weak action in gold and silver. The XAU did worse than most sectors on Monday -- including Financials, Tech and Healthcare -- and slipped below its 200-day.







As the market seems poised at the brink of collapse, the bond market further discounted the chances of a recession. While the 2-year/10-year curve has been repaired for over 5 weeks, the more finicky 3-month/10-year inversion is steadily moving in the right direction as well.







Finally, as bombs fall all around, the TOF Ratio -- like the IBD100 -- continues to hang in there.







Into every life a little rain must fall, and it looks like May 1 could bring more showers.

Until then, have a great evening.

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