Today we had a number of good reasons for selling. Earnings reports from Amazon, Microsoft and Ford were weak, the fourth quarter GDP came in soft, and there was the unrest in Egypt . The Egypt situation creates uncertainty and raises speculation that unrest could spread throughout the Middle East or could impact oil transportation through the Suez Canal . The aggressiveness of the selling today warrants our attention. Not only was breadth nearly 5 to 1 negative with heavy volume, we also have a new daily high on the SPY accompanied by a low that broke many days of support. The Russell 2000 small-cap index is particularly worrisome. After the breakdown a week or so ago, we now have a failed bounce and a lower high. We are still holding the 50-day simple moving average, but one have to wonder about a potential change of character in the market. The NASDAQ has a similar setup and it has already breached the recent lows. With any sort of downside follow-through, we will have a confirmed break of the uptrend line. That said we have the first scary whoosh from a high and we are one trading day away from the positive beginning of the month seasonality. It should probably generate at least a bounce if not a new high. Have a nice weekend.
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