Market Alert - The Close

Monday set up as a repeat of Friday, i.e. another modest fade after punching out new highs on the indices. Sure enough, stocks fell in the morning, testing the Friday lows at near support. As the afternoon session started, however, stocks started a steady recovery to the closing bell. Or almost to the closing bell; some pre-earnings nervousness hit and there was a late slide to the close that shoved SP500 out of positive territory. Perhaps the nervousness was warranted as GOOG earnings disappointed on the costs per click and it dove down 28 points in the early afterhours. Made us wish we went ahead and entered the GOOG puts even though GOOG was up on the session. Oh well.

SP500 -2.63, -0.11%
NASDAQ 23.06, 0.36%
DJ30 -66.90, -0.31%
SP400 0.16%
RUTX 0.15%
SOX -0.41%

Not only did we stay out of GOOG puts, we also bought little. We picked up some GLUU early as it continued the Friday upside break (at least for the morning) and took some gain on AGEN as it surged to our initial target. Other stocks slid back and forth across our entry point all session, e.g. JD, WDAY, PXLW, ARNA, but none showed really strong action. Kind of like the market overall, so we opted to let them show a better move.

Leadership more or less stood around and watched though some surged such as AGEN noted above.

Financial stocks did little ahead of the Wednesday FOMC meeting, awaiting the Fed's next, likely no-change rate decision, to make their next move.

Biotechs/Drugs were not bad with large biotechs continuing upside, e.g. CELG, AMGN, while others surged, e.g. AGEN cited above. IMGN surged off its 50 day MA on strong volume while BLUE jumped back through the 50 day MA on the bet volume in 2 weeks.

China stocks were decent. JD moved up to the buy point but showed no trade so we held off. BZUN rose another 5.5% while HTHT added another 1.5%. BIDU shot higher. NTES, SINA, SOHU put in modest gains, nothing really definitive off of support testing.

Metals, Materials: Flat on the day but flat is not bad as many sport solid patterns.

Manufacturing, Machinery: Some good moves, e.g. HOLI surging again, adding another 2.8%. CAT, CMI, TEX all rose. Not bad here either.

FAANG: All but NFLX rose. No major breakouts though AAPL put in a higher recovery high. GOOG moved nicely into earnings (0.76%) but then dropped 3% afterhours. Impact on other FAANG? FB off a couple of points, AMZN off 7 points, AAPL flat, NFLX flat. Not that much carryover to other FAANG.

Software: Still setting up nicely. VMW still looks good to break higher while CRM is not bad. DATA up as it works in a tight lateral range over the 20 day EMA. Decent setups.


Thus, the indices were mixed with NASDAQ leading higher while most others stalled around the flat line. The important chart feature: intraday tests lower to near support followed by new moves higher, maintaining very good consolidation action after moving to new highs. Certainly no reversal by RUTX or any other index for that matter.

GOOG may have an impact on the Tuesday trade, but when you look at the numbers, while they may not have met the high expectations in terms of every metric, the results, accepting the method of accounting, are more than solid. In other words, the business is strong (no shock there) and does not reflect any slowing in this area of economic activity. Perhaps then GOOG may take lumps for itself while the market continues working on its test and setup for a continuation of the higher highs.

Have a great evening!

Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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