GOOGLE LEADS MARKET INTO HIGHER VOLUME DECLINE -- NASDAQ 100 FALLS BACK BELOW 50-DAY AVERAGE -- HOUSING STOCKS STARTED TO FALL BEFORE THE BAD NEWS -- BULLION BOUNCES WHILE NEWMONT FALLS

GOOGLE FALLS ON BIG VOLUME ... Today's market selloff can't be blamed entirely on Google. There were other factors at work as well. But the plunge in Google didn't help. A disappointing forecast sent the huge Internet stock plunging over $30 today on huge volume. The last time trading was this heavy in Google was back in mid-February when it first broke its 50-day moving average. The last time we showed Google it was testing its 200-day line near $340. It's back there again. That caused heavy selling in the Nasdaq market and totally negated the short-term buy signal that I wrote about yesterday in the Nasdaq 100.

Chart 1

NASDAQ 100 FALLS ON HEAVIER VOLUME ... Yesterday's article showed the Nasdaq 100 Shares (QQQQ) closing over their 50-day moving average to register what I believed to be a short-term buy signal. That price signal was negated with today's decisive close back below that line. Part of the failure can be found in the volume pattern. I wrote yesterday that volume needed to pick up to confirm the price rise. It picked up a bit, but not by much. Today's downside volume, however, picked up noticeably. In fact, today's price drop saw the heaviest trading in nearly two weeks. That's not a positive sign. With the Nasdaq on the defensive, the rest of the market also fell on heavier volume.

Chart 2

S&P FALLS ON HEAVIER VOLUME... Chart 3 gives a short-term look at the S&P 500 SPDRs (SPY). No serious price damage was done. The SPY remains above its 20- and 50-day moving average lines. The most disturbing element in today's selling was the heavier trading. The last red volume bar was the biggest in nearly two weeks. That follows generally light volume on the recent price rise and suggests that short-term momentum is shifting to the downside. I'm reluctant to draw any major conclusions from one day's price action, especially when major and and intermediate trends are still up. However, today's action raises a caution flag that bears watching in the day's ahead. One of the reasons for today's selling was a big drop in consumer confidence which followed more bad news on the housing front.

Chart 3

DR HORTON IS FALLING AGAIN ... One of the newswires that reported yesterday on the big drop in new home sales (and the jump in unsold homes) stated that this was the first real sign of a slowing in the housing market. Actually, the first sign of slowing started more than six months ago in the stock market. I've written several articles about the peak in housing stocks last summer and their continuing underperformance since then. The poor chart action in DR Horton (the country's biggest homebuilder) is symptomatic of the entire homebuilding group. The stock peaked last July, rebounded in November, and peaked again in January. The stock has fallen back below its 200-day line (as have most of the others in the group). The drop in the relative strength ratio since last summer shows the fall from grace in this former market leader. If it's true that stocks usually peak before the fundamentals (and we believe they do), then the first signs of a housing peak occurred last summer -- not yesterday.

Chart 4

GOLD STOCKS FALL WHILE BULLION CLIMBS ... Normally we expect to see gold and gold stocks trend in the same direction. Right now, they're not. The drop in consumer confidence caused selling in stocks and buying in bonds. The drop in bond yields weakened the dollar and gave a boost to gold and most other commodities. Gold stocks, however, weakened (as did energy stocks). Chart 5 shows Newmont Mining falling to a two-month low today (on rising volume) after breaking its 50-day line yesterday. [The XAU Index is also trading below its 50-day line]. Chart 6, however, shows the StreetTracks Gold Trust Shares (GLD) climbing the equivalent of $7.00. It's unusual to see both moving in opposite directions and suggests that, at the moment, the commodity may be a better bet than the stocks.

Chart 5

Chart 6