Selling pressure overcomes buying demand for second day in U.S. stock market

When popular market indexes gain or lose 1% or more in a day, we’ll try to take the time to comment on it here. Go figure I said that yesterday, now I’m writing about it two days in a row.

Much like yesterday in Stock market indexes lost some buying enthusiasm for the day the S&P 500 stock index closed down 1.01% today. The SPY traded most of the day above yesterdays close, then broke below that level after 3PM. Like yesterday, the last trades were downside volume, which is selling pressure.

But, the above chart is the intraday price trend of what happened in a single day, today. We aren’t making decisions for such a short time frame. I only show the day to discuss today’s action. So far, it isn’t anything too unusual, but that could change.

What’s more important is a bigger picture. The chart below is still only two months, so not the big picture, but since the stock indexes are in a correction the last several weeks, I’m zooming in to see the detail. Two down days of -1% or more is evidence of some selling pressure and distribution, but so far it isn’t a change or trend direction. If the trend declines below the prior low, which I marked with the black line, then I wouldn’t be surprised to see if fall further. In other words, it should get some buying demand (support) at that level. If it doesn’t, we may see further downside. The reversal back up from the February 9th low could be coming to an end and set the stage for a retest of the low. Only time will tell. We’ll see. I don’t have a position in this, but the S&P 500 is a widely followed index we use as a market proxy.

I predefine my risk by knowing in advance when I’ll exit my positions if they decline. I do it to control my risk in each position and for drawdown control at the portfolio level.

Mike Shell is the Founder and Chief Investment Officer of Shell Capital Management, LLC, and the portfolio manager of ASYMMETRY® Global Tactical.

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Investment results are probabilistic, never a sure thing. Past performance is no guarantee of future results.



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