A weak start, a weak finish, and unlike Tuesday, there is nothing to discuss that was very positive. The small and midcap indices faded sharply, metals stocks lost their upside aspirations, and SOX broke decisively below the 50 day MA. At least SP500, DJ30, and NASDAQ held the 50 day MA. For now.
SP500 -8.85, -0.38%
NASDAQ -30.61, -0.52%
DJ30 -59.44, -0.29%
VOLUME: NYSE -2%, NASDAQ -8%. Volume did decline on the downside. As there were no bids, the sellers were rather tame as well.
A/D: NYSE -2.2:1, NASDAQ -2.2:1. With the small and midcaps struggling, not surprising the decent level of negative breadth.
The other markets moved in directions that are in line with weaker stocks that are perhaps starting to factor in a less robust economy in the absence of tax and healthcare (also a tax) reform.
Bonds rallied again, pushing the yield to 2.264%, the lowest since 2015.
Gold continued its move through the 200 day SMA.
Oil sold back a bit after approaching the 54-55 resistance.
The dollar continued lower, aided by President Trump stating he felt the dollar was too high and need to come down. Okay, if you are not going to back a strong dollar you get a weaker dollar, but that is a BIG mistake. That is a George Bush (I and II) policy path and it is a bad one as they proved. You cannot devalue your way to prosperity. You make your currency so valuable that everyone wants it, that they want to invest in dollar denominated assets.
SOX: After the Tuesday furious recovery off a 50 day MA breach, Wednesday SOX just gave up. Kind of like the middle aged man who gets out of shape, his clothes don't fit right, and he just figures he will never be in shape again. Starts wearing sweat bottoms, loose fitting shirts, and eats and drinks whatever he wants. Not a pretty sight. Anyway, SOX is threatening to put on the sweats as it broke lower and closed near the session low.
SP400/RUTX: After talking up the midcaps and small caps and 0.6% and 0.75% moves they give up over 1%. The possible short inverted head and shoulders pattern is still there, but they made it hard on themselves, closing back below the 50 day MA's.
NASDAQ: After testing the 50 day MA on the Tuesday low and rebounding similar to SOX, NASDAQ just went ahead and fell to the 50 day SMA. Lighter trade so no surge in sellers, but today NO ONE was buying on the dip. Still trending higher, still can put in a higher low just by holding the 50 day MA support. That is enough for now and given the poor session.
SP500/DJ30: Down but quite modestly as the two NYSE large cap indices closed at the 50 day MA. No real change for these wild caballeros as they continue their slow, slow lateral test of the 50 day MA. I suppose on this session if you are not breaking down you are ahead. Sad state of affairs.
Metals: Not doing it. The on one day, off the next action continued and Wednesday was an off day. ZEUS gave up its Tuesday move and more, AKS dove below the 200 day SMA, X really made us mad by rolling back over hard. FCX gave up any pretext that it might get stronger. AA was hammered lower almost 7%. Perhaps some downside opportunities, e.g. RS, AKS.
Semiconductors: As you would surmise from SOX' break lower, the chips didn't have a banner upside session. Much of the issue related to QCOM, getting hammered in another lawsuit, losing over $800M in binding arbitration (no appeal) to Blackberry. Oh the humiliation. SWKS broke sharply through the 20 day EMA. AVGO broke decisively through the 50 day EMA. SLAB is not diving but its pattern suggests it could. XLNX continues lower, almost to our initial target. MLNX held up well enough as did QRVO. MU off harder, AMD down but at some support. BRKS is fine as is AMKR and PLAB. Not all is lost, but there was an important move.
FAANG: Somewhat toothless on the session but definitely not rolling over as FB, AAPL, AMZN, NFLX all held reasonably well at near support.
Retail: Held up well enough as well. JWN nice and flat. COST is fine. DLTR still in a very nice pullback. EBAY is solid.
Financial: Struggled post-Trump. BAC faded to the March lows. C could not recover the 50 day MA's. JPM lost a bit of ground. Just not able to get going.
Transports: UAL's loss is other airline's gain. SAVE rallied over 2.5%. LUV gapped over the 50 day SMA. As for truckers, whatever good vibes the KNX/SWFT merger brought, it left. ODFL fell to a lower low on this pullback. WERN broke back below the 200 day SMA. JBHT might be able to pull off a short double bottom at the 200 day SMA.
Oil stocks: Up early, could not hold the move. APA umped then faded to flat. APC was up but slipped back on low volume to continue working on its pattern. NE broke below the recent lows. CRK jumped then faded some of the Tuesday rally. Just not a lot of pop in the group today, but still look good to move higher.
Biotechs/Drugs: A tougher day than Tuesday but not bad. CNAT faded just a bit. IMMU still holding the 50 day MA test. INVA off just a bit. XOMA holding the 20 day with a tight doji. EXAS with a decent enough move off the 20 day EMA though light on trade.
We closed some upside positions Wednesday. Many are testing back; that is what the market is doing right now. If there is a rebound, great. If the weakness remains and chips continue to flounder, not too crazy about seeing how far positions will test. There are still very good setups and solid tests of support. We will see if the good patterns can hold the line and deliver a new upside leg off this test. If not, you have to look at more downside plays to take advantage of the fade.
Have a great evening!
Jon Johnson, Chief Market Strategist
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