Market Alert - The Close

What doesn't kill you . . .

NASDAQ again moved to a higher high pushed by narrow band of stocks. The rest of the indices followed higher, but no new highs from this group as they remain, for now, locked in their ranges. So-so breadth, so-so volume. In position to break higher for sure, but five weeks and counting of lateral movement right below the prior highs.

SP500 6.42, 0.28%
NASDAQ 11.83, 0.21%
DJ30 98.75, 0.50%
SP400 0.35%
RUTX 0.17%
SOX 0.38%

VOLUME: NYSE -5%, NASDAQ +4%. No upside volume on NYSE though NASDAQ showed some better trade, moving just over average for the first time in over a week, as NASDAQ moved to a higher high. That at least shows some more buyers for the big techs.

A/D: NYSE 2.2:1, NASDAQ 1.2:1. I say buyers for the big techs because breadth remained very light.

Sentiment over 60% as well, a historically very accurate gauge of at least near term market tops. Moreover, the market action is amazingly volatile intraday even if the VIX is getting pounded down into oblivion in this 5 week lateral move. Wednesday stocks started higher, rallied a bit more, but then were hammered lower midmorning when Trump talked some smack to the drug companies. 20 minutes straight down, then 20 minutes straight back up, only to be followed by 2 hours downside to a lower session low. Then an afternoon rally that recaptured all that was lost and added gains on top of that. Again, what doesn't kill it . . .

You cannot count this 9-lived market rally out at any time, even when it tries to break down (as seen in June then again in November. No bout of selling has killed the rally, and thus far in the long advance, anything that didn't kill the rally made it stronger. Or at least led to higher highs.

Thus, we are not shorting this move at all, not yet. Indeed, with the indices consolidating laterally, there are still many good setups to counterbalance the tired looks of some stocks and sectors as they bump prior highs on lower MACD. Even NASDAQ with its higher highs is showing lower MACD; that is not definitive but does show some sluggishness.

A key to this market remains: even if stocks look tired and wander laterally on lower MACD and some intraday volatility picks up, the sellers are not selling it or at least are not able to sell it. Big funds have purchased a lot of protection as the put/call ratio shows, and so they are willing to hang in because they are downside protected. Thus there is no need to sell; let the other guy do it, and if he does and the market falls, they are protected and can use the drop to buy again.

On the day we didn't do much. Sold the last of the JNPR position as it struggled with a drop to the 50 day MA. We let the FANG plays work along with others holding their moves. Most were holding despite the volatility, but that volatility is also one of the warning flags. So, we let positions work as long as they will because, again, what doesn't kill this rally seems to ultimately help drive it higher again.

Have a great evening!

Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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