Market Alert - The Close

And the dance around the prior highs continues. Stocks started weak, continuing the Tuesday downside, but again there was no selloff, no breakdown, at least in the large cap NYSE indices. RUTX small caps, well, they broke below the September low. A catalyst, a harbinger for the other indices? It does show that the divergence between NYSE indices and the NASDAQ/SOX combo is growing in some cases. While it may be a stretch that this results in a market selloff, it definitely means watch the other NYSE indices as well as NASDAQ.

Of course SOX was still fine and SP400 though it gapped down did not breach the September low. NASDAQ gapped downside as well thanks to AAPL, but it held over the 50 day EMA with a doji. SP500 gapped lower as well but it showed its own doji over the 2015 prior all-time high.

DJ30 was somewhat interesting. It gapped down ugly thanks to AAPL, but it pulled off a great, of sorts, recovery, closing positive, the only major index to do so. It still had its usual issues, e.g. touching the 50 day EMA on the high and fading back, but it did not struggle at the lows.

SP500 -3.73, -0.17%
NASDAQ -33.13, -0.63%
DJ30 30.06, 0.17%
SP400 -0.51%
RUTX -0.93%
SOX -0.17%

VOLUME: NYSE +6%, NASDAQ +8%. Volume jumped back above average on NYSE, average on NASDAQ. Yes, some downside increased volume but as has been the case, not a huge surge in trade. Technically there is a bit more downside volume than upside in the range, but most indices are holding the range.

A/D: NYSE -1.8:1, NASDAQ -2.2:1. Breadth may be tipping slightly to the downside, but again, nothing severe, nothing suggesting wanton unloading of shares.


NEWS/ECONOMY

AAPL was a big story given its market cap and thus its impact on several stock indices. Earnings for the most part are not bad at all in terms of expectations beats (KO, BA, BIIB, GRMN, PNRA, JNPR, AKAM, GNRC, etc.), but of course beating lowered expectations in a continued trend lower in overall profits is winning a skirmish in an overall losing war effort. It can buck up the troops' spirits near term, but the reality returns soon enough.

Oil prices careened back and forth after API reported a huge build then EIA reported a draw of 550K when a build of 1.699M was expected. It gapped lower, rebounded to positive, but in the end gave it up. Of course oil was blamed for the stock market's ups and downs. The same old stories to explain the market moves, as usual, continued.

The September trade deficit was better (-$56.1B versus -59.1B prior) as the higher dollar did not really impact US exports. The INTERESTING story related to interest in US assets involves China's action with its purchases. In the period January to August, China purchased $86.6B worth of Japanese bonds. During that same period, China SOLD almost the same amount of US Treasuries. Sure looks as if China is swapping out of US assets just as Russia is doing. They don't want to have any US assets when the serious conflagration between the US and a loose alliance among China and Russia erupts. Those assets may decline in value in such an instance. Something like foreshadowing?

New Home Sales, September rose 3.1%, but that was actually deceptive. August was revised so much lower that the 593K recorded was actually a miss of expectations. So, the August beat was not so great, and the September beat is less than expected because of the revisions. Gee, kind of sounds like earnings.


As for the market, the indices outside of RUTX managed to hold their trends and ranges, despite losses on the session. SP400 is back at the range low. RUTX broke the range low. SP500 is again holding the 2015 prior all-time high as it did last week. DJ30 bounced upside to test the 50 day EMA again. SOX and NASDAQ are still holding their trends. More of the same, i.e. no real change, but also no real breakdown (outside of Russell) as the indices continue in a sideways range.

Leadership was not bad at all.

Chips managed some decent to good gains from MRVL, NVDA, MU while QRVO looks very good.

Financial stocks posted some solid moves with some breaking to higher highs on this leg of the move.

Big Names struggled across the bard as GOOG put in its second downside session, AMZN fell for a second session as well. AAPL had its earnings issues while FB also faded. NFLX was very quiet.

Tech: MSFT is holding its rally. WDC jumped higher. STX is still working along the 50 day EMA. Software looks interesting, e.g. BLKB, RHT -- the perhaps need a bit more setting up, but PANW sure looks ready to move.

Metals still look good overall, e.g. CENX, SID, STLD. That is a good indication.

Again, plenty of leadership to carry the indices higher.

We picked up the M's today: MDU, MRVL, MU. All posted nice upside moves in a weaker overall market. The stocks indices are mostly holding their relative positions, but that is not all that comforting with the NYSE indices still unable to make the move higher. With RUTX breaking to a lower low, breaking the bottom of its range, that tips the scales a bit more toward the negative bias. Thus, while there is plenty of leadership upside, if key indices start breaking the September lows, that becomes an anchor weighing on even strong indices such as SOX and NASDAQ.

Have a great evening!

Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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