Market Alert - The Close

The selloff that was not quite ready for a selloff. That is the story of Monday. It was one of those mornings where you get up and see equities significantly lower, this one apparently caused by a weekend mulling the significance of the healthcare Ryan-bill failing and then no Monday surprise regarding resurrecting it with changes all would love (it is Advent, so talk of resurrection seems appropriate).

Thus, futures started much lower, at least in terms of this rally with Dow futures -130+ points, NASDAQ -29 points, SP500 off 18 points.

The lows, however, were hit in the first 10 minutes, at least in terms of SPY. Other stocks and sectors struggled through the morning, but SPY managed to hang on and by the close it was back over the 50 day MA. Along with SP500 and DJ30.

SOX rattled the bar at the 20 day EMA on the open but recovered to positive. NASDAQ gapped to near the 50 day MA, pretty much completing the test we talked about over the weekend, then rebounded to positive itself.

SP400 and RUTX also recovered off of lower opens, but they did not really change their bearish patterns.

SP500 -2.39, -0.10%
NASDAQ 11.63, 0.20%
DJ30 -45.74, -0.22%
SP400 -0.15%
RUTX 0.20%
SOX 0.16%

VOLUME: NYSE +5%; NASDAQ -5%. Mixed trade. It is a positive to see an early selloff bought on rising volume. It was not a key reversal, however, as DJ30, SP500 closed lower. Holding the 50 day MA on rising volume, on the other hand, is still positive action, showing there are buyers at that level. NASDAQ did not show the same kind of buying off the test of the 50 day. Yes it recovered but not a surge of buying.

A/D: NYSE 1.1:1, NASDAQ 1.3:1. Upside breadth on such a reversal is not bad. Not great, but not bad.

We picked up some downside early and they did come back at us. Most did not repair their bearish patterns, however. We also picked up some upside in biotech (CNAT) and specialty (TSLA). BITA, EXPE still look good to the upside if they can make the moves with some volume. We took some gain on IDRA, letting a good portion of that position continue working as well.

All in all this was a good response to the weak open, and DJ30 and SP500 made their tests and left themselves in position to work. NASDAQ arguable did the same thing and SOX is not even worried. For the moment. SP400 and RUTX came back from lower lows, but I am not about to call them reversals.

Basically a session where the indices were on the ropes then pulled off a recovery where they had to. No major volume, no key reversal, but perhaps they can continue to work back upside as they have done so many times.

We will play the good patterns upside if they continue to show up, but also we will still be ready for the downside. Those we took today will need to be watched but if this was indeed a shakeout, but many patterns are still showing a downside bias just as many in biotech for example continue showing upside bias.

Have a great evening!

Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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