Market Alert - The Close

Stocks came to rally Monday after a decent week that saw some weakness at the end -- other than DJ30. SP500 joined DJ30 at a new high. The other indices did not, but they made very solid bounces off their tests. Even with 1.4% to 1.9% moves by NASDAQ and SOX, however, they are still well off their prior highs and need to show more to give the signal they are back in the upside game. They held support, giving them a change to bounce, and Monday they started to bounce.

SP500 20.31, 0.83%
NASDAQ 87.25, 1.42%
DJ30 144.71, 0.68%
SP400 0.61%
RUTX 0.81%
SOX 1.94%

VOLUME: NYSE -66%, NASDAQ -36%. NYSE trade fell below average as SP500, DJ30 hit higher highs. Not great strength on a new high for those indices.

A/D: NYSE 1.7:1; NASDAQ 2:1. Decent upside breadth. Nothing more than decent.

From the internals you can see the move was not that forceful. NASDAQ trade held above average and breadth was not bad. Again, decent enough strength to support the move but would like to see a broader move.

CHARTS

NASDAQ: Gapping off the doji at the 50 day MA, clearing the 20 day EMA and closing near the high. Volume of course dropped off from the Friday expiration levels but did hold above average. Not anywhere near the selling volume, but solid enough after the quick double bottom at support. A good break upside.

SOX: Gapped off the 50 day MA and the short double bottom test there as well. Not a banner day for chips overall, but doing what it needs to do at this point to hang on and follow the NYSE indices in their trends.

DJ30: Gapped and rallied to a strong new high, at least in price terms. Volume was a disappointing below average, but the upside trade has been solid enough on this rally. As with SOX before, DJ30 is getting a bit overdone near term, but it likely continues upside near term.

SP500: Gapped off the 20 day EMA and to a new high, closing out at the session peak. Volume here was lower and below average. So, not a powerful move but it works.

SP400: Gapped off the 20 day EMA, moving up through the late April and early March highs. Gapped lower Thursday, gapped upside Monday in something of an island reversal. No new high but put in a higher low as it did in early June before it rallied to a new high once more.

RUTX: Bounced off the Friday doji at the 20 day EMA, putting in a higher low and now shooting for another new high.


LEADERSHIP

China: Some nice moves. NTES surged off its test. SOHU broke nicely higher while SINA is starting a good move off its drop to the 50 day MA. YNDX looks as if it is ready to make a move higher off its test. ATHM is in a nice two week consolidation.

Machinery: CMI and TEX posted great moves while DE and CAT took a day off.

Financials: Solid enough as BAC gapped upside and rallied. GS solid and we entered. TCBI and OZRK jumped but faded; still look good. Looking solid.

Biotech/Drugs: IMGN posted a solid gap and rally. BLUE is moving and if it continues we can move in.

Internet: Some good moves such as BCOR, GOOG. Also the Chinese internet, e.g. NTES.

Oil Stocks: Not horrid and still some good patterns. HOS jumped late. APA is not bad in its setup. CVX still trying to break through the 200 day SMA.

Chips: Hanging in, but that is about all for now. VSH is not bad in its pullback as is SMTC. ON is holding some support, XLXN is jumping off the 50 day MA. Will see if the chips continue to recover. They led higher, got overdone, now are following.

Transports: Not horrid. DAL (airlines) bouncing off a 20 day EMA test and holding the break over prior highs. ODFL (trucking) is holding a higher high. KSU holding a high, NSC bouncing off the 50 day EMA. Oh, these are rails.

Tech: SSYS, DDD starting a new good bounce. MSFT bounced higher off the 50 day MA. CALD looks great to bounce higher.

Very good start to the week in price terms, a bit disappointing for volume and breadth, particularly on NYSE. After a plunge two Fridays back, at least on NASDAQ and SOX, the market again found fast support as a sharp dive lower somehow, almost magically, found support. Not the first time for this market . . .

We picked up some very good moves today and there are still more out there that can produce moves you want to buy. The same issues face the market, the same warnings that it cannot last, that the bubble is stretched, that the move must reverse. It will at some point, but with solid stocks setting up and break higher and those that sold off hard but found support bouncing nicely as well, the market appears to still have enough buyers.

The pullback left some stocks in great position, they are moving, we used it to enter. Will continue to look at good patterns making good moves as new entries as stocks are still in the buy zone as this bounce off the test continues.

Have a great evening!

Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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