Market Alert - The Close

Wednesday wasn't the day that the futures suggested. A nice pop in futures, nothing huge, but OPEC announced a deal was a done deal and futures jumped sharply 4.5 hours ahead of the open. They even improved into the open. All indices opened higher and rallied farther. For 10 minutes. That turned out to be the peak for much of the market.

After 10 minutes the stock indices started to slid and solid into the first hour. Some back and forth trade into the afternoon session, then a selloff to lower session lows into the close.

SP500 -5.85, -0.27%
NASDAQ -56.25, -1.05%
DJ30 1.98, 0.01%
SP400 -0.22%
RUTX -0.44%
SOX -0.65%

VOLUME: NYSE +76% (1.6B); NASDAQ +11% (1.9B). Massive end of month volume, necessitated by the huge surge in stocks that forced end of month moves.

A/D: NYSE -1.5:1, NASDAQ -1.8:1. That is how narrow the move was.

A sad finish for stocks but not all stocks. The stocks that got the whole rally started were in the lead along with oil stocks, the latter surging on confirmation of a long sought production deal. APC +15%, WLL +30%, RIG +17%, CWEI 18%. Yes CWEI doesn't make those 30% gains as easily as it used too - back when we bought it the first time near 25. Financial stocks rallied, industrial equipment, chemicals.

FAANG doesn't have a bite right now, not even a bark. Chip stocks tried to rally, turned soft. Metals, one of the first leaders, posted slight gains after giving up their early moves. Software faded some of their moves as did internet. Not bad, just not participating.

Still part of the consolidation? The intraday patterns certainly suggest it. It looked as if the OPEC deal would be the day's tide that lifted all stocks after a 1.5 day 'test.' That initial reaction, as noted, did not last, and the intraday reversals suggest the short pullback is not enough to digest the 10% RUTX and other stellar index gains. So, while a narrow slice of the market moved up by the close, the majority of stocks suggest still some testing.

Perhaps something of a return to the first part of the rally where very specific groups rallied initially, then new money would seek new areas while the first leaders rest? Could be. Leadership groups, even those that did not surge with oil, are still in good position. How they test of course tells the tale. Thus far the leaders are still holding their patterns and that is always the test when there is a pullback: who holds up best at those times is often a leader when the next move starts.

We took some gain on WLL, RIG per the plan as they shot higher, leaving half the position to work. We bought some CWEI stocks as well as some TX and XLNX. They looked great - then faded the move along with most stocks outside the small cadre of Wednesday gainers.

Jobs Report on Friday and I suppose some are paying attention, but that is all 'old administration' stuff. This rally is about the future and optimism, begging the question, of course, how long can just some good feelings about the future hold on? We are going to find out as this test will show just how animal the animal spirits are.

Have a great evening!

Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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