Talk about divergences. Thursday I wrote about the index divergence growing with SP400 joining RUTX below the September lows while SOX held its up trendline. Friday it was a different kind. From a Q3 GDP beat pre-market announced less than 2 weeks from a national election to an afternoon FBI revelation that new evidence was discovered regarding the Clinton email case.
Stocks had overcome some early weakness to post decent gains. When the news hit they tumbled into negative territory in reaction, then spent the afternoon recovering some lost ground. The market was confused regarding the impact of this news and traded accordingly. In short, basically no change from Thursday.
SP500 -6.63, -0.31%
NASDAQ -25.87, -0.50%
DJ30 -8.49, -0.05%
SP400 -0.09%
RUTX -0.20%
SOX -0.59%
VOLUME: NYSE flat; NASDAQ flat. Talk about pulling back on the news in a wait and see posture. Indeed after the news hit and the volume jump as the market sold, volume dried up. Even so, it was still above average volume on both NASDAQ and NYSE.
A/D: NYSE -1.5:1, NASDAQ -1.4:1
The indices did not show any real change on the session, but that was not the case on the week.
NASDAQ tested deeper, closing below the 50 day MA's Thursday and then below the 2016 up trendline on Friday.
SP400 and RUTX made key breaks below the range lows, specifically the September low, on the week, trading flat with doji Friday.
SP500 faded on the week, but had held the 2015 high, the prior all-time high. Friday SP500 let that go, selling down to the September low on the session low then managed to recover some of the loss.
DJ30 did what it did each session last week: tested the 50 day EMA on the high and then faded from that resistance. The Dow has not, however, broken lower and is indeed tightening its range. After gapping higher Monday off of the 50 day SMA,
SOX spent the rest of the week moving laterally in an up and down range. It is still holding its trendline, in reality the only index holding the near term trend after Friday.
On the week the action tilts toward a more negative bias with RUTX and SP400 breaking below the September low. NASDAQ is at the lick log, breaking the 50 day MA's and the January trendline. The others are holding on in the ranges or trend as the case may be.
Negative, but the big boys (or girls if you want) have not broken and indeed DJ30 has tightened its range, refusing to sell back with the other indices. In short, the bias may be tipped more negative, but it has not fallen to negative for the entire market.
With the Fed out there and its friends in central banks from other countries ready to buy whenever there is a problem, perhaps that is why the market has not dropped. Heck, maybe they were in the action after the FBI announcement. Won't know that until Yellen's phone logs are released, IF they don't scrub them now after the February log showed the calls to the BOE and the ECB with sharp market rebounds within a half hour after each of those calls.
Thus we did not do a lot on the session. Picked up FCX on a good break higher but with this news breaking we did not move into other new positions, preferring to wait until next week to see how this comes out in the political and market watch. It could be a wild weekend or it could be just another weekend and new week in a market working through earnings while the Fed stands in the background.
Have a great evening!
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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