At first, you might laugh at the title and say: “What selloff? The market was only down -0.41%.” Keep in mind I mainly trade individual growth stocks and beneath the surface, there was some damage today.

1) Relative to how much the general market was down, an abnormal amount of stocks were down over -4% on Monday.

2) The IBD 50 (an index consisting of market growth leaders) was down -2.2% on Monday. It was also down -1% last Friday but strong earnings reports from $GOOG $MSFT and $AMZN masked the weakness that day.

3) The Nasdaq Composite had a big volume distribution day, its second in the past 6 days. Keep in mind that distribution (professional selling by the institutions) can happen on the way up.

4) Many Biotech and Semiconductor stocks are starting to breakdown. These have been the recent leadership sectors. I don’t think they are done going up, I just think they need time to setup again. To paraphrase Jesse Livermore, if you are having trouble making money in the leaders, you will have trouble making money in the overall market.

Conclusion: It’s tough to get too bearish because we are still in a global liquidity driven environment. However, the warning signs listed above are definitely a reason to be cautious until we get a clearer picture. The market’s overall uptrend is still intact, but these are the times when it pays to know your timeframe, have a proven market philosophy, and stick to your discipline. Good luck trading!

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