More to Go on the Downside

Traders greeted the news of Obama's re-election with bearish pressure. We saw heavy selling in areas of the market that are viewed to be on the wrong side of the Obama agenda, such as coal and defense. We also saw heavy pressure on dividend-producing names as traders start pricing in expectations for significant tax hikes on dividend income.

The weakness on Wednesday wasn't enough to move the needle for our indicators in a significant way. In other words, we expect to see selling pressure continue until our indicators "clear" and reach an oversold extreme.

The recent bearish pressure is coming from the largest-cap names in the market (S&P 100).

S&P 100 vs. S&P 500 Metastock View Chart » View in New Window »

Our indicators show us that the bearish pressure has failed to penetrate to the secondary and tertiary names in the indices so far. We see this difference show up in the comparative relative strength of the equal weight S&P 500 compared with the cap-weighted S&P 500....326 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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