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Why the Stock Market Is in Danger

By Tom Dyson, editor, S&A Penny Trends
Friday, July 16, 2010

The S&P 500 is the most important stock index in America... and it drives the return of all other stock markets around the world.
 
This makes the chart below a troublesome one for investors...
 
 
The chart above displays the past six months of trading in the S&P 500... with its trading volume displayed in the "window" at the bottom. Each day's trading volume is marked by a single bar. On days the market declined, the bar is red. On days the market climbed, the bar is gray.
 
You'll notice that during the April/May selloff, trading volume boomed. It was much higher than the volume in March. This indicated investors were selling stock with much greater force in May than they were buying them in March.
 
This selling force sent the index from just over 1,200 to under 1,040 in two months. And then, two weeks ago, the market bounced...
 
But notice the volume on this bounce... indicated by the gray volume bars below the price chart. I've put a blue box around them. The volume behind this bounce is weak, meaning there's very little enthusiasm from the buyers here. This makes me skeptical of this rally.
 
A healthy market is driven higher by large institutional investors like mutual funds, hedge funds, and pension funds buying big chunks of stock. Their huge buying power shows up in tall gray bars. So far, we're not seeing that sort of buying.
 
Until we see some serious big money flowing back into the market, I think stocks in general are in trouble.
 
Good trading,
 
Tom




In The Daily Crux
Market Notes
Giant China fund FXI down 11% in three months while Singapore (EWS) and Malaysia (EWM) trade near 52-week highs.
 
Natural gas jumps 7%... looks to break downtrend after dropping 20% in four weeks.
 
Market bets Gulf disaster will be fixed... BP shares up almost 40% in three weeks.
 
Earnings today... General Electric (giant conglomerate), Bank of America (giant bank), Citigroup (giant bank).
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1064.88 -2.9% +13.2%
Oil 34.16 -1.2% +1.8%
Gold 116.67 -1.3% +26.8%
Silver 17.49 -2.6% +33.6%
US-Dollar 82.48 +0.1% +4.1%
Euro 1.29 0.0% -8.6%
Volatility 26.25 +4.4% +3.3%
Gold Stocks 443.87 -3.3% +28.9%
10-Year Yield 2.94 -1.3% -17.4%

World ETFs
Symbol Price
Change
52-Wk
USA 106.66 -2.8% +14.6%
Canada 25.68 -3.0% +15.5%
Russia 17.18 -3.1% -3.5%
India 30.76 -1.2% +6.1%
Israel 14.11 +0.1% +24.0%
Japan 9.35 -2.5% +0.9%
Singapore 11.81 -1.4% +24.6%
Taiwan 11.83 -1.8% +9.0%
S. Korea 46.37 -3.8% +23.7%
S. Africa 56.47 -1.7% +17.4%
China 38.74 -2.8% +0.0%
Lat.America 42.90 -2.7% +21.5%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 100.65 -2.9% +0.4%
Big Pharma 60.67 -1.6% +0.8%
Internet 51.99 -3.3% +16.6%
Semis 12.94 -2.3% +11.8%
Utilities 29.69 -1.7% +5.5%
Defense 16.28 -3.3% +13.9%
Nanotech 8.40 -2.9% -7.3%
Alt. Energy 8.72 -3.0% -11.8%
Water 15.14 -3.6% +2.3%
Insurance 14.29 -2.7% +19.6%
Biotech 17.06 -3.2% +24.9%
Retail 15.77 -3.3% +8.2%
Software 20.82 -2.9% +21.8%
Big Tech 44.34 -2.8% +18.7%
Construction 11.12 -4.0% -0.7%
Media 11.48 -4.6% +28.0%
Consumer Svcs 55.29 -3.1% +22.0%
Financials 50.70 -4.2% +16.3%
Health Care 58.97 -2.3% +8.7%
Industrials 52.38 -3.3% +21.7%
Basic Mat 55.39 -3.3% +23.4%
Real Estate 47.95 -3.1% +45.7%
Transportation 74.45 -3.0% +24.9%
Telecom 19.16 -2.1% +10.4%

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