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On the Razors Edge

With the major indices down another 2% or more today, a major decline may be in the making. The chart of the S&P 500 shows that it made a new closing low today.

spy_7_9_2008.png 

A decisive close below the January and March 2008 lows will signal a fresh round of new selling. There are two key takeaways from this chart: the rally off the March lows has been erased and the volume for the last six weeks (all down) has been higher than the volume on the rally. This is a sign of professional institutional selling. What do I mean by institutional selling? I define institutions as the players who trade in large blocks and have the ability to move stocks up or down.

Take a look at the chart of the mortage lender Freddie Mac, down 23% today.

fre_7_9_2008.png 

The stock has traded 200 million shares this week, way above average volume. A sign that institutions believe worse is to come and that they just want out of the stock.

 

Posted on Wednesday, July 9, 2008 at 04:49PM by Registered CommenterMichael in | CommentsPost a Comment

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