This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

In Today's U.S. Stock Market It's Only Downhill From Here

NEW YORK (TheStreet) -- Emotions continue to run very high in this stock market as we approach the last trading day in May.

Even as first-quarter GDP was revised down to -1.0% from a previous +.1%, the stock market on Thursday continued to move higher. Goldman Sachs had a 1Q GDP target of 3% on Jan. 30. It is pretty clear now that the 10-year bond had it correct as prices moved higher and yields moved lower. Growth is slowing.

The DJIA closed up 65.56 points at 16698.74 and the S&P 500 closed up 10.25 at 1920.03. The Nasdaq was higher by 22.87 at 4247.95 and the Russell 2000 was up 3.39 at 1140.07.

Volume on Thursday was pathetic. So, once again, this is a market that is up on air. Another reason for the slowing volume is equity funds managed just a $678 million inflow, well below the year-to-date average of a $3 billion inflow.

These short hedge funds are the only player in town. They can push this market to extraordinary levels on the upside. I sensed a lot of emotion out there among traders on Thursday. The feeling that many have missed this upside has forced many traders to chase these extreme overbought conditions.

At one point in the last hour of trading I had the sense that some short hedge funds finally capitulated and threw in the towel and covered their short positions. That usually happens at the market highs.

From my perspective, where we go from here is down. I know I have been looking for that downward move the past week. The internal algorithm numbers have shown some extraordinary overbought conditions in the large-cap sector -- overbought conditions I have not seen in over a year, according to my own algo numbers.

When I show a 19-2 ratio of extraordinarily overbought vs. extraordinarily oversold large-cap stocks, I take notice and so should you.

What this all means currently is traders need to be patient and not chase these extraordinary signals. This is a marathon and not a sprint. There will be many more opportunities to buy stocks at much lower prices.

Control those emotions and have a repeatable risk management process that works. If you do not have such a process, feel free to join us at www.strategicstocktrades.com for a free chat every Friday and ask those important risk management questions while viewing my internal screen.

On Thursday, I closed out my long Market Vectors Gold Miners ETF (GDX) position for a better than 1% gain. I added to my short positions in EPAM Systems (EPAM) and AmerisourceBergen (ABC), as both are flashing a 100, extraordinarily overbought signal.

At the time of publication the author was short EPAM and ABC.

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

>>Read more: Want Yield? Stay Away From Treasury Inflation-Protected Securities

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,960.57 -123.23 -0.72%
S&P 500 1,978.34 -9.64 -0.48%
NASDAQ 4,449.5640 -22.5440 -0.50%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs