Selling Continues - Posted by Coolhand

The selling continued on Wednesday with small caps helping to lead the way.

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Price on the DWCPF closed at or near the previous low from early March; and it closed pretty much at the low of the day. Volume was average (for the S&P). Price on the S&P also closed at the low of the day, but it has yet to test support at the 50 dma. Momentum continues to fall on both charts, but is more pronounced on the DWCPF.

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Cumulative breadth dipped, but not as much as one might expect given the overall negative action. Still, it's a bearish signal.

So, the charts are showing some technical damage; especially the DWCPF with support broken at the 50 dma. We also have a bearish cumulative breadth on the NYSE. Now, things are exactly falling apart as yet, but there has been talk of inflation and I personally think we may already be seeing the early stages of it. This is a problem that will only get worse if it continues on its current course. Remember, this bullish ship has gone a long, long way and it won't stop on a dime. The money is going to continue to play as it has until it becomes painfully obvious that something really is changing. I'm making an assumption here regarding inflation. This has yet to be proven, but it needs to be watched.

Tomorrow, we get a fresh read from NAAIM. Keep in mind that they were bullish last week, but not overly bullish. We have no idea how these managers are positioned aside from their sentiment (where are they allocating their money?). I'm talking about heat maps (where money is flowing to and from). It's still too soon to get overly bearish, but our antennas should be up.

I am going neutral from modestly bullish.