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The number of distribution days in the major stock indexes is growing up. Last week, we saw the small-cap index testing the technically important level near 150 and surviving. SPY tested 280 again is it didn’t break. The more frequently one level is tested the weaker it becomes; therefore, a break becomes more likely.
If SPY loses 280, the odds are that it will quickly test its 200-day moving averages near 277 before it attempts a bounce.
While it is true that we continue to see relative strength in a decent number of software and biotech stocks, the current momentum is on the bearish side. We are seeing more negative reactions to earnings. There are more and more sectors breaking down and therefore, the market breadth is worsening.
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