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Don't Extend Your Stay in This Market

NEW YORK (TheStreet) -- Two days of gains in the DJIA and the S&P 500 were wiped out in Tuesday's trading. This stock market is not for the amateur trader or investor. The stock market in 2014 is quickly becoming a hit-and-run type of market.

Do not overextend your stay.

The DJIA lost 137.55 points to close at 16374.31. The S&P 500 lost 12.25 points to close at 1872.83. The Nasdaq was down 28.92  to 4096.89 and the Russell 2000 was off 16.53 points to 1097.90.

The biggest common denominator in trading was the increase in volume as compared to the two most recent up days. Once again, the volume on these selloffs is much higher than the up days. I have been mentioning this theme for a while now. It is important.

There is a liquidity factor, in this case the lack of liquidity on the down moves. Traders and investors need to take notice of this fact. The news media is not at all concerned about this. As long as the market is moving higher everything is just fine. I am here to tell you that it is not fine. Volume will matter when you least expect it. It will matter on the down moves. They will become more vicious and rapid in a market that lacks liquidity.

Even though the Nasdaq was down 29 points on Tuesday's trading it could have been much worse if not for the momentum-chasing hedge fund community. We have seen this movie over and over again. The Netflix (NFLX), the Yandex (YNDX), the Yelp (YELP), and the Amazon (AMZN) hedge fund chasers continue to buy the highs.

I am here to tell you that this movie is nearing the end once again. We are within a day or two with those stocks rolling back over. They are all approaching extreme overbought conditions according to my algorithm process.

Just some thought concerning each of those stocks. I am not sure traders or investors are aware of this fact. YELP is down 41% from its year-to-date high. YNDX is down 29% YTD from its hugh, NFLX is down 18% YTD from its high, AMZN is down 26% YTD from its high, and Facebook (FB) is down 17% YTD from its high. They are all in Trend Bearish territory. This is not a bull market in growth stocks in 2014. Take notice.

In sum, the Nasdaq and Russell 2000 are deep into Trend Bearish territory and even though the DJIA and the S&P 500 are in Trend Bullish territory, they are getting closer to joining the Nasdaq and Russell 2000.

On Tuesday, I sold my Family Health Company (FHCO) long position this morning for a 2% gain. At the end of trading I started a short position in AmerisourceBergen Corp (ABC) that was signaling an extraordinarily overbought condition. All trades can be found at

At the time of publication the author was short ABC.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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