Market Alert - The Close

As noted in a morning session alert today, my pre-market prediction the Dow would hit 20K on the session proved incorrect by just under 19 points. The Dow and other indices opened higher as futures indicated, then sold. They tried to bounce some into midmorning then rolled over into midday, trailing off into the afternoon close with an uneventful 3 hour range.

SP500 -18.96, -0.84%
NASDAQ -48.88, -0.89%
DJ30 -111.36, -0.56%
SP400 -1.05%
RUTX -1.23%
SOX -1.93%

The indices all broke through the 10 day EMA except SOX as they felt the first sting of some selling after the NYSE indices' attempt to build a lateral consolidation the past two weeks. Very likely part of the rebalance selling as funds sell some stocks and buy some bonds to get their portfolio percentages in line with their promised investment criteria.

It appeared as a very calm selloff as the financial stations were quiet, not as breathless as usual when the Dow loses 100+ points and NASDAQ pushes at a 1% loss. Nonetheless, there were some of those reversals you get when markets start higher but the bids are immediately pulled. AMD, XLNX, NVDA, AKS, RS showed more violent outside down days, but many sectors showed the higher open followed by the reversal to negative, including financial, industrial machinery.

At the same time, some sectors appeared relatively immune. Internet rallied again as LLNW posted upside along with another gain by LIVE (though it did fall well off a big opening gap). Biotech, large and small, looked quite solid. Tech held up quite well. Of course it was just one day of selling festivities, and if it persists, these other areas quite likely feel a bit of the sting as well.

We continued to manage positions, not entering anything new but taking more gain off the table on positions such as AKS, BAC, DIS, XLNX and closing those that were struggling, e.g. NBL, SIMO. The idea is to protect now, see how they test, then get back into some positions if they hold decently at a lower level and set back up.

There is a ton of speculation on every financial station what the new administration policies will do to stocks, bonds, currencies, etc. The position pretty much, shockingly, breaks upon the side of the aisle the commentator sits. Basically, they know nothing and are speculating in ways that favor their political bias and their book, not necessarily in that order.

We try to keep it simpler. Stocks are solid but started to struggle as some mutual fund investment mix rebalancing begins. It likely lasts into at least part of Friday. It likely won't be all that deep but could be sharp. No one really knows how the market will absorb $35B in sales in a few sessions. It will probably handle it easily enough, but with some positions sporting January options, we would prefer to lock in the gain and then look to pick up new positions again after the rebalance concludes.

Then after that, there is the new year. Will it bring a new focus? If it does will the initial leaders hold their gains or sold to fund new buys? Again, we lock in some gain now on stocks that have run well, have nearer term options; let remaining positions and other positions in good shape run; have a stable of good plays that are not extended that could get new money in the new year looking for lower priced, 'value' stocks.

Have a great evening!

Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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