A Change in Market Direction

SYNA is a poster child for a shift in market sentiment. There’s nothing momentous about this company. It has a market cap just north of $1B making it a very small mid-cap. According to our software there are over 1300 publicly traded companies that are larger. But its trading activity makes it a “tell” for the current market.

SYNA began its uptrend late last year, well ahead of other stocks making it a relative strength outperformer. To its June peak it about trebled. Stocks in well defined uptrends such as this can usually be bought on the rather rare occasions when they touch their 50 MA’s, provided the market remains supportive.

And here we have the rub. SYNA pulled back on disinterested volume the last several days. Yesterday it settled just north of the 50 MA. Every institution interested in this stock certainly saw it last night, all set up as a “buying opportunity.” Only today nobody’s buying.

SYNA sliced below its 50 MA on volume almost from the opening bell. No one even made an attempt to defend the line. When you see stocks in well defined uptrends so blatantly fail to find support at typical areas of institutional interest it’s time to duck and cover.

The market will certainly bounce, but longs are countertrend now. You can’t expect the extent of a bounce out of a reversal formation that you would in an uptrend. Better yet, rallies are shorting opportunities. Earnings season could change all of that, but it increasingly appears the market isn’t betting on it.