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Thursday, March 16, 2017

Market Alert - The Close

Oh no, no follow through. That was the cry on most of the financial stations afterhours. RUTX and NASDAQ managed slight gains as the small caps ty to keep playing catch up to the other indices. It was, all in all not a satisfying session for the bulls, and it gave the bears fodder to argue for a pullback.

SP500 -3.88, -0.16%
NASDAQ 0.71, 0.01%
DJ30 -15.55, -0.07%
SP400 -0.06%
RUTX 0.23%
SOX -0.18%

VOLUME: NYSE -12%, NASDAQ -9%. Volume faded back below average as the indices paused following a solid volume advance Wednesday. Not necessarily bad action.

A/D: NYSE 1.3:1, NASDAQ 1.5:1.


The indices faded some of the Wednesday post-FOMC move. SP500 and DJ30 held at the 10 day EMA on the low. SOX and NASDAQ held well above the 10 day EMA while SP400 both held over that level as well. Not much upside, not much downside.

It was certainly not a reversal of the Wednesday move higher. Yes NASDAQ failed to take out the prior high on the close. SOX gave up its new high, barely. SP500 and DJ30 were not that close to a high anyway. Oh yes, DJ30 hit 21K then gave it up; I guess you could argue that was a reversal. Nah. It was just a non-day after a new rebound. You can call that ominous, and it may turn out to be, but there was nothing in the session or in the leaders that really raised any alarms or warning flags.

Leadership did not post a power move across the board as some gave back some recent gains while others posted excellent moves. Several sectors of leaders were mixed on the session, e.g. semiconductors, biotechs, China. Doesn't mean they did not have strong moves in the sector, it is just that some early runners were winded while new arrivals were running. Others had no issues at all, e.g. materials, software, and a mix of stocks from our 'miscellaneous plays' (PENN, SQ, GRMN, PII).

Mixed? Yes, but mixed still with an upside bias still in place.

So was this great action? No. Overall sluggish. There were some great moves yet again and we picked some of them up and let current positions work. Was it a reversal? No. Once again the sellers are nowhere to be found. A lot of people are talking selling, and it makes some sense with the weaker economic data in Q1 (outside the sentiment data points), the Fed still ready to hike, uncertain administration agenda items.

I don't want to sound like a raging bull, but even Credit Suisse and UBS are claimed to be telling their clients to buy stocks given "it feels really difficult and challenging to put money at work . . . ultimately those are often the better investments. That sense if skepticism, that wall of worry, which is still there, . . . is not a discouragement." Okay, maybe there is reason to take pause when the big banks are pushing stocks, but on the other side you have major houses still claiming the market is at a top. Houses divided? Perhaps there is something to that 'wall of worry' claim.

All I can say is that the indices pulled back to test the move higher, put in a normal test, leadership held up and some moved up during the overall fade, the indices started higher, leaders were still moving higher. Now we see if the move can continue. Nothing has changed in the economic, Fed, or other stories, so you would anticipate the upside bias would continue to hold and control. If it does not, THEN that is something to really pay attention.


Even with a slow overall session there were solid moves. We picked up a variety of positions that still moved well. IDRI, INFI, JPM, PCRX, SQ, ZBRA. Still plenty of stocks moving well even as the market overall idled.

Was this a bad session, a warning? That remains to be seen. You get a 50-50 split whether a session after a new rally starts continues higher or tests a bit. After a good pullback to set up the bounce, regardless of which kind of session occurs next, the rally still typically continues, especially if leaders hold and still move higher.

It can still fail of course, but it will have to show actual sellers entering. And if sellers show up and downside occurs on volume with leadership reversing, yes, that is a problem. For now, there is a lot of fear of the heights, but without sellers, that is all it is.

Have a great evening!
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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