Anyone that has been following this market should realize how weak it has been. Each day starts with a small to mid size rally before inevitably falling most of the day. In addition, the volume has been relatively high on the exchanges. Days that have a higher volume than the previous day and are down are known as distribution days. When you get a handful of these in a 2-4 week period, it usually means the market is going to be selling off in the near future. Sure enough a few weeks ago Investors Business Daily (IBD) gave a market in correction signal based on this indicator. Since then, the markets have dropped almost 10%.
Until we get what is known as a "follow through day" to the upside, (which I won't describe) the market remains in correction. This does not mean that we won't have a few days that could rip to the upside. In fact, usually the weakest markets go down for days on end then have one monster upside day before resuming the down trend. It is the lack of any "follow through" that defines the down market. With this in mind, we are due for a big upside day. Nonetheless, until we find some footing in the markets, the safest place to be, if you cannot go short stocks, is in cash.
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