Market Remains In Sell Mode :
The S&P 500 has been in distribution mode since breaking down below the rising 10-week moving average (MA) in early October and has yet to show any signs of bottoming. Bearish momentum is building on the weekly chart below with the 10-week MA crossing below the 40-week MA. Note that each rally attempt has stalled at the declining 10-week MA. Any bounce off the lows should be monitored for short entries in stocks that are breaking down below the 50-day MA on the daily chart.
If you operate on the long side of the market only, then cash is king. The risk-reward ratios for longs are not favorable right and won’t improve until market volatility contracts and major indices stop trending lower. When risk-reward ratios are not favorable, the reward for going long isn’t worth the risk we take holding the position.
During any corrective phase in the market, there are usually a handful of stocks that show relative strength by basing out (above the 50-day MA or 10-week MA) or even trending higher ($CDXS below) while major stock market averages sell off.
Below are a few stocks that have held up really well during the current market selloff. When market conditions improve these stocks could be the first to move higher.