Tough Trading in a Wobbly Market

 | Dec 06, 2012 | 11:30 AM EST
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The Nasdaq Composite flashed its second distribution day, or higher-volume decline, Tuesday, falling 0.8%. The percentage decline wasn't all that bad considering that Nasdaq-100 bellwether Apple (AAPL) cratered 6.4% to $538.79. Volume totaled nearly 37 million shares, well above its average daily volume of around 21 million shares. Apple's recent rally took it close to its 200-day simple moving average (SMA) around $597, but this price level looks like a significant resistance for now. The intense selling in Apple Tuesday wasn't anything new. The stock has been under distribution since late September (in an Oct. 25 column, I asked "What's Wrong with Apple?")

When it comes to overall market health, institutional selling remains fairly well contained in the major averages -- which is a good sign for the bulls. There's only been one meaningful higher-volume decline in the S&P 500 since indices flashed a mild buy signal on Nov. 23. That said, the Nasdaq and S&P 500 are facing early resistance at their respective 50-day simple moving averages. They could be tough nuts to crack in the near-term, but if the market perceives progress in fiscal-cliff talks in coming days, this could bring more institutional money in from the sidelines.

It's also interesting to note that recent weakness in the U.S. Dollar Index hasn't done much to lift the market out of its recent malaise. The market normally likes a weak greenback but that hasn't been the case in recent days. It's lost ground in five out of the past six trading sessions. Over the past four trading sessions, the Nasdaq has lost 1.3%.

One thing is for sure:  Growth investors aren't happy to see failed breakouts from the likes of Stratasys (SSYS), Qihoo 360 Technology (QIHU) and Myriad Genetics (MYGN), among others. If nothing else, it's a sign that sellers are still around -- not only in these names but in the broader market as well.

Three-dimensional printer maker Stratasys cleared a swing point of $69.08 in light volume on Nov. 21. Volume came into the stock two days later as shares surged 7% but the enthusiasm was short-lived. The stock has lost 12.8% in the past five trading sessions. Meanwhile, Qihoo's breakout looked great on Monday but it face-planted in no time. The stock has lost 11% in the past two trading sessions.

My Ultimate Growth Stocks model portfolio has several newly opened positions: six are profitable and two aren't. That's not a bad winning percentage, but the problem is that profitable positions haven't made much headway. A short position in Tractor Supply (TSCO) has made the most headway.

I'm content to sit tight for now and watch current holdings. I'm in no rush to add anything new, especially since I'm not seeing much in the way of actionable long setups. In fact, short setups probably have the upper hand over long setups.

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volatility is quite low here, and we could see some downsides here in the short term. ...



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