Technical Alert: Markets Fall Sharply As Reality Sneaks Back In

The markets are flushing lower today, negating the entire move from last Friday. Friday, February 1st, 2013 saw a solid Non Farm Payrolls Report, great revisions to past numbers and also a fantastic ISM Report. The markets surged higher, the Dow Jones Industrial Average closing above 14,000 for the first time since 2007.

As expected, it appears Dow 14,000 was just a way to get the small, retail investor excited and back in the stock market. This is a common theme throughout history. Whenever the markets are at 52 week highs and major levels are closed above, the retail investor buys. Who are they buying from? The institutions, who are happily selling to them.

On a technical basis, should this reversal hold, it will be very bearish. A reversal candle, negating the entire move higher should signal further downside in the coming weeks. The fact that it is happening at a 52 week, multi year high, adds fuel to the fire. Additionally, one must be concerned that mutual fund inflows have continued at a record pace as the retail investor flocks into stocks.

Swing Traders Action Update: Today, great gains were seen in Pacific Ethanol Inc PEIX. An alert was given to members inside the Research Center to accumulate at $0.35 a few weeks ago. Today the stock spiked dramatically higher. Profits were taken at $0.45 for a 28.5% gain.

Gareth Soloway
InTheMoneyStocks