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Wednesday, April 19, 2017

Market Alert - The Close

The market indices are now back to looking to NASDAQ to lead them to the new high land. IBM earnings missed and that heavily weighted Dow stock gapped below the 200 day SMA, falling over 5% on the session low. That dropped SP500 and DJ30 back below the 50 day MA's, joining SOX and SP400 below those levels.

Indeed, the growth areas sans IBM performed better, posting solid enough gains off a higher open, they just didn't change their fate significantly. NASDAQ was the best technically after the session, but again, that leaves NASDAQ still having to pull the market's weight.

SP500 -4.02, -0.17%
NASDAQ 13.56, 0.23%
DJ30 -188.79, -0.58%
SP400 0.23%
RUTX 0.38%
SOX 0.55%

VOLUME: NYSE +8%, NASDAQ +9%. Moved close to average on both exchanges. Rallied on the NASDAQ move higher, ostensibly an indication of buying, but I am not jumping to the conclusion that Wednesday was an accumulation session. By the same standard, while SP500 was down on higher volume, IBM accounted for a lot of the spike (19.3M, 6x average trade), and it still held fairly well in its pattern. DJ30 saw volume move to just over average, but it also held at the Fibonacci retracement on the close. as did NYSE, thanks to the massive spike in IBM volume (19.3M, 6x average trade).

A/D: NYSE -1.2:1, NASDAQ +1.5:1. Even with the small and midcaps posting gains, NYSE breadth was negative. Very strange action.

While there was trouble with earnings, as in more top line misses (IBM, BLK, TXT), others both with and without earnings scored nice gains. ISRG bolted higher on its earnings. BRKS in chips gave us an entry while PLAB posted a nice day. FAANG was mixed. FB rallied, NFLX broke lower, the rest held their ground.

Others continued to struggle and look problematic. Industrial equipment struggles and we moved into some CMI puts. CAT gapped upside, rallied, then reversed the entire move as sellers sold it on volume. HON gapped then reversed lower.

Financial stocks remained weaker. C gapped higher and reversed lower; a continued drop and it is a downside entry. MS gapped higher on earnings, but after touching the 50 day EMA faded half the move. GS continued lower. Others are problematic, e.g. BAC, but even if they recover, they need work.

Biotechs were mixed with EXAS scoring upside but CORT dropping toward the 50 day MA. IMMU flopped back to the 50 day MA after a nice break higher Tuesday. XOMA managed to hang onto its Tuesday break higher. Mixed, but this is a volatile group, with big upside and downside moves.

The action in the indices remains problematic. While holding near highs, they are also off the highs and finding it difficult to move back up and hold the moves. I have said before that long-term runs have a hard time dying as people keep believing that the upside will return after every hiatus; it takes several hard jolts to wear the bids out of the market. Right now, there have not been a lot of hard jolts, thus there are still bids returning.

The bids, as the stock indices show, however, do not have the same force and effect. If they are basing that works; they can take their time, wear out those trying to sell the market, then break higher. That remains to be seen. There are still solid patterns breaking higher but there are also sellers taking shots at them when they do, testing the water to see how strong the bids are. We are still playing good upside breaks (entering BRKS today), but also some good downside breaks (e.g. CMI). The downside have worked sporadically (e.g. XLNX) but the bids have often won out. Now we have a few more positions downside and we will see if the market fails in this bounce attempt.

Have a great evening!

Jon Johnson, Chief Market Strategist
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