A Behind-the-Scenes Selloff?

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The Rude Awakening Wednesday, April 3, 2013 |0930 Hours A Behind-the-Scenes Selloff? Small stocks, transports slip... Technically, selling is selling... Plus: A busted gold trade Greg Guenthner coming to you from Baltimore, MD... Greg Guenthner New highs are in for the Dow again. Ditto the S&P. But under the surface, the market’s not looking so spectacular. The Russell 2000 cracked this week. It tried to get up yesterday, but small-caps couldn’t hold their ground. Transports followed. The Dow Jones Transportation Average dropped more than 1.2% Tuesday. Both the transports and the Russell registered slightly lower highs to kick off the second quarter... Commodities are tanking, too. Gold, silver, platinum, copper -- all are lower this week. Of course, some pundits have been quick to defend yet another sharp selloff in precious metals. It’s only “technical selling pressure” they say, as if the move lower doesn’t apply to any fundamentally- minded investors. Perhaps long-term holders should receive a special voucher to give to their brokers entitling them to higher prices? Something to consider... In truth, selling is selling. No matter how you slice it, the effects are the same. With all the selling in small-caps, transports, and metals, it’s clear that the second quarter is already working its voodoo. The market feels heavy. I’m seeing more failed breakouts during my daily rounds. Big, safe names are propping up the market. But how long can they hold everything else together? To be clear: it’s not time to fly your crash flag. There’s no guarantee that a major selloff will rock the markets this month. After weathering the Cyprus scare, anything bigger than an orderly pullback would surprise me at this point. But I wouldn’t be surprised if stocks leaked steadily lower. While everyone is watching new highs in the major indexes, the market’s undercurrents are hard at work, plotting to take their money... For now, your strategy should remain the same. Don’t chase momentum. Stick with your large-cap names until they show signs of weakness. Stay vigilant. Rude Numbers Targets, Predictions and Wild Guesses 1,566 is where you’ll find S&P futures early this morning... $1,571 buys an ounce of gold today. $27.18 will get you an ounce of silver. $1.07 dropped off the share price of U.S. Steel Corp. yesterday. Commodity names suffered steep selloffs across the board... 57% of U.S. listed stocks remain above their 50-day moving average. If you’re keeping track, you’ll notice fewer and fewer names are propping up this rally. Rude Trends When to Buy... When to Sell “If you’re looking for long-term buying opportunities in mining stocks, watch for GDX to hold $37 as it consolidates last week’s move off its lows,” I wrote back on March 12. “Then, you’ll need price to confirm that a bottom is in place. Once GDX is back above $40, you’ll have a perfect low-risk entry point.” So far, this bottom has not materialized... We witnessed a precious metals bloodbath yesterday. Gold miners -- and the Market Vectors Gold Miners ETF -- were not immune to the selloff. GDX fell more than 4% before the closing bell, pushing the miners index closer to new lows on the year. This is why it’s so important to wait for confirmation before you place a trade. GDX never met our criteria. It never got close to $40 -- and it failed at $37. By the looks of it, this drop might not end anytime soon... [Ed. Note: By the time you read this, I’ll be on my way to New York. I’m dealing with a packed schedule through Friday, so I won’t have the opportunity to closely monitor the markets. More importantly, I won’t be sending the Rude Thursday or Friday. But don’t worry -- I’ll be back on the grid Monday morning. In the meantime, send your feedback here: rude@agorafinancial.com -- and follow me on Twitter: @GregGuenthner] Ignore At Your Own Peril Today's Must-Read Links A Year’s Worth of Oil... for $1? What happens when Hollywood meets Wall Street... 3 Lies About Retirement... Most People Believe! Additional articles and commentary from The Daily Reckoning on: DR iPhone APP To end The Daily Reckoning’s Rude Awakening e-mail subscription and associated external offers sent from The Daily Reckoning and The Rude Awakening, cancel your free subscription here. Please Note: If you unsubscribe from The Rude Awakening, you will also be unsubscribed from The Daily Reckoning. If you are you having trouble receiving your Rude Awakening subscription, you can ensure its arrival in your mailbox by whitelisting the Daily Reckoning. Copyright 2013 Agora Financial, LLC. All Rights Reserved. Protected by copyright laws of the United States and international treaties. 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