May 5 There She Goes Market Liquidation Update and Bearish Stock Scan

May 5, 2015: 2:14 PM CST

With price doing exactly what it should be doing given the weakness and numerous divergences into resistance, we’re simply trading bearishly as the market falls sharply from its upper target toward lower support levels.

Take a moment to read the “S&P 500 Level Planning on the Bull Trap Breakout” update and let’s examine where we are and we’re we’re planning.

Here’s our expected T3 Trend Day down for reference:

Here’s a snippet from Monday evening’s Member Strategy Report that forecast today’s rally:

Let’s state the facts – we’re back at new highs into the underside of 2,120 with WEAK volume and WEAK momentum in a WEAK rising/bullish trend.

We’re expecting another logical sell-swing against the 2,120 level and will play short/bearishly under 2,100.

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Trend Days in the market occur when both sides of the market are doing the same thing – for different reasons.

In this case, sellers (with the odds in their favor) became aggressive into resistance and short-sold repeatedly today.

Bulls had the choice of taking profits, closing open positions as the market failed to break higher and instead reversed lower … or else bulls had the choice to sell open positions at a loss in order to prevent a small loss from morphing into a large loss.

The result is a one-direction sell-swing market which was our expected/logical/dominant thesis last night.

Let’s see what our Breadth Chart reveals about current market strength (or weakness):

Given the one-directional selling pressure striking the market today, all sectors are beneath the 50% Breadth level and all sectors except three show Breadth readings at or under 5% which is remarkable.

Days like this have us focusing on the sell side and completely ignoring the buy/bullish side.

Why search for the diamond in the large pile of dirt when you can be far more efficient just grabbing a handful of dirt?

Why look for the 9% of stocks that are positive right now when you can target bearish trades in the 91% of S&P 500 stocks that are down?

Trend days are efficient ways to profit from rapid, sustained price movements.

Energy and oil are today’s strongest sector as I highlighted earlier with the “Crude Oil Breaking Out” update.

Still, if you can’t fight the urge to find the rare diamond in the pile of bearish stocks, fight the odds with these:

UBS, Golar (GLNG), Kennametal (KMT), and Estee Lauder (EL)

Bearish downtrending candidates include the following stocks from our “weakness” scan:

International Paper (IP), Qualys (QLYS), HSBC, and Motorola (MSI)

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Corey Rosenbloom, CMT
Afraid to Trade.com

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Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

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