The OPTI was in O's suggesting the Optionable stocks, largely Nasdaq, were on sell signals and things could get hairy. That was a major indicator telling you to be careful with those stocks.
The Nasdaq chart itself was on a major high pole which is a warning alone for any chart.
But I think the point is you aren't allowing for a normal pullback. The Nasdaq has moved 3340 to 4090 in December alone, that is 750 points! How unreasonable was it to pull back 370 some points? Why is it so odd that after the DJIA pulled back and the Nasdaq soared that the reverse is true now? I think people aren't conditioned to the large swings and of course don't want anything to move down, especially tech stocks. It has to happen though and this was by no means a crash.
With the OPTI in O's and the Nasdaq so very extended a pullback was highly possible and very much needed.
The NYSE BP tells us the overall market direction is positive which we have seen to be true.
Besides, not all stocks broke down. The Nasdaq did fall but the Nasdaq doesn't measure all stocks. If you owned the prime stocks in that sector you got hit but in general more stocks remained in X's and gave buy signals than those giving sell signals.
Even thought the Nasdaq gave back some points the indicators stayed the same on a week to week basis telling us the sell off was a pullback and that buying would come in. If the selling was more than a pullback the indicators would have flipped negative and we would have seen more selling. So far it seems the indicators were right on through the whole thing.
Here is an article from DWA last night.
FOOD FOR THOUGHT
It continues to be a wild ride for the market at the beginning of the
year. The financial news media is having a field day talking about
the "market." You know, the "market" of the NDX, SPX and DJIA.
The problem is that is really not the true market. It is important to
remember that these indices represent only a handful of stocks. They
are not representative of a broad, cross section of stocks. If the
prominent indices were representative of the average stock then they
would not have been posting gains for 1999 when 66% of the stocks
on the NYSE were down for the year. Here are some statistics you
might not have realized but are important to keep in mind when you,
and more importantly your clients, hear their favorite financial
newscaster talk about how the "market" was up or down.
The top ten stocks in the Nasdaq Non-Financial Index (NDX)
account for 46% of the movement in that index. Those ten stocks
are: MSFT, QCOM, CSCO, INTC, ORCL, WCOM, YHOO,
SUNW, DELL, JDSU.
The top ten names in the S&P 500 control 28% of the movement
in the SPX and the top twenty names control 40% of the
movement. The stocks are (in order of most influence to least):
MSFT, GE, CSCO, WMT, INTC, XOM, LU, IBM, C, AOL, T,
MRK, SBC, AIG, WCOM, ORCL, HD, KO, PG and RD.
The ten highest priced stocks in the Dow Jones are AXP, GE,
IBM, JPM, MSFT, HWP, PG, MMM, JNJ, and AA. Those ten
stocks account for 50% of the movement in the DJIA.
Considering the overlap, when the financial media quotes the
"market" as being up or down they are really reporting on the action
of 31 stocks! There's a whole lot of interesting things happening in
the true market like cyclicals, biotechs, financials getting oversold,
etc.
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