DJIA and S&P Finally Succumb to the Nasdaq and Russell 2000

NEW YORK (TheStreet) -- What a day in the market. After an initial surge higher at the open, all the indexes did an about face and turned to the downside in afternoon trading.

The Nasdaq was the big leader to the downside. It closed down 110 points at 4127.72. This is a Trend Bearish close for that index according to internal algorithm signals. The Trend is a three month or more time frame. This Nasdaq Trend Bearish is very important. The Russell 2000 closed down 27.74 points at 1153.38 and is within four points of a Trend Bearish signal according to that same algorithm indicator.

The DJIA closed at 16412.71, down 159.84 points and the S&P 500 closed down 23.68 points at 1865.09. Both indexes are nowhere close to the Trend Bearish levels of the Nasdaq and Russell 2000.

As I have been warning in my previous columns, we have had a two-tiered market that could not continue very long. This out-of-sync market was a red flag that had to resolve itself, one way or the other.

As was noted, the DJIA and the S&P 500 were trading in overbought territory while the Nasdaq and Russell 2000 were quickly leading to the downside. That problem was resolved on Friday.

Jobs report or not, whether it was good or bad on Friday did not matter in the end. The markets needed to come together and attempt to get back in sync from a structural standpoint.

The volume on Friday finally came into play with the S&P. The volume on Friday was 154 million shares, much greater than its 50-day moving average of 127.5 million shares. Again, the down volume has greatly exceeded the up volume during 2014. This is a red flag warning that should be a concern for traders. Caution is warranted in this stock market. Wreckless buying without proper risk management is not an ingredient for trading success -- 2013 trading has long been over.

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