Market Alert - The Close

After a higher start, stocks struggled to hold gains, trending lower form the open to the mid-afternoon FOMC statement. Stocks bounced on the statement's mostly dovish language, more or less confirming the Yellen testimony, but the bounce's half-life was 30 minutes as stocks peaked then slid lower into the close. It took a literal last-minute buy to bounce SP500 positive on the session. DJ30 fared better as it rode along as BA soared almost 10% on its earnings. Everything else was . . not much.

SP500 0.70, 0.03%
NASDAQ 10.58, 0.16%
DJ30 97.58, 0.45%
SP400 -0.85%
RUTX -0.56%
SOX 1.16%
NASDAQ 100 0.34% -- A NASDAQ large cap move


One area of import, the small and midcaps, took it on the chin. SP400 gave back all and a bit more of the Tuesday gap and rally. RUTX was a bit more restrained, holding some of the prior gain as it tested back toward the 10 day EMA. Not a reversal, but a rapid retreat from the surge higher. At the same time SOX saw money come its way after some solid earnings results. NASDAQ 100, the leader in NASDAQ's last move, more than doubled overall NASDAQ's gain. That was not a massive surge by any means, but it shows, again, money moving into a very narrow group of NASDAQ stocks.

There was certainly some rotation, and a lot of it was away from midcaps generally, and away from metals, materials, and even some financials, while moving into China stocks, BA, AMZN, chips. Oh yes, and bonds and gold stocks as well as a dovish Fed propelled bond and gold buying once again.

After an initial break higher by all groups, rotation appears to be setting in. Thing is, it has not made a definite, well-defined move but is jumping back and forth session to session. If rotation is here again, and it has been for the past two days in a rather helter skelter manner as noted, it will likely favor the big name NASDAQ, semiconductors, large cap industrials that enjoyed the attention on the last significant rally.

NEWS/ECONOMY

The FOMC played a role, perhaps not so much in the overall market move, but definitely in certain areas. As noted, stocks rallied immediately after the statement more or less affirmed Yellen's congressional testimony. It did not set off a buying binge, but it assured the market that the FOMC does actually reflect Yellen's spoken views.

More on this tonight.

Bottom line: Many believe no rate hike now until December, and perhaps the Fed will initiate balance sheet reduction in September since it likely puts off a rate hike.


THE MARKET

CHARTS

DJ30 gapped higher, held the gains, lower volume, thanks to BA's big earnings move. Without BA, the Dow would have put in just another flat session. As it is, the Dow continues its trend over the 10 and 20 day EMA. Oh yes, and a new all-time high! Cue the balloons and confetti.

SP400 quickly gave up its gap and rally to new highs from Tuesday, falling hard to give it all back. It would appear the very narrow breadth Tuesday, even as SP400 and RUTX surged, apparently was the Achilles heel. Still holding over the 10 day EMA and the March and June highs, but these kind of reversals off of new highs suggest buyer's remorse -- as well as rotation back out of these stocks after three weeks of good moves.

RUTX was also not what it was Tuesday, giving up the new high but at least still holding over the 10 day EMA as it trends higher. Not great action, but hanging on nicely.

NASDAQ pushed to a new high as did NASDAQ 100. Nothing super about the move, more like a continued drift upside because there is no reason to head lower. Some of the FAANG (read AMZN) got money while chips enjoyed a good day. Voila, a new high with the largest NASDAQ stocks leading.

SOX gapped upside rallied past last week's high, then faded a bit of the move. Still closed higher on the back of some solid earnings reports from various semiconductors. Still up on its 3+ week move but finding some resistance at 1120. That is acting as some resistance, but thus far nothing has stopped it.

SP500 edged higher, needing a very late bounce to close positive. Volume faded back below average as SP500 showed a second doji at the upper channel line from early 2009. Bumping that resistance and for now riding up it. That is not bad action, i.e. just sliding higher after an already good move.


We picked up CTRP (China stock), JAG (alternative energy), and IDRA (biotech). IDRA continued the Tuesday break higher -- then it dumped it back. JAG and CTRP held very good moves. We did not like the action in some metals and closed two positions. Also closed C and GS to see how the post-FOMC response plays out. Ag chemicals came under some pressure so we dumped CF.

The session overall was nothing really great. Some nominal new highs but no surges. Individual stocks performed, but overall rather blah. For new highs the past week, the overall action sure is sluggish. The rotation working the past couple of sessions hamstrings the overall upside as money rotates out of one sector to another, pushing up the latter, pushing down the former.

It is clear the Fed still has the market's back as Yellen indicated to Congress. Therefore, despite the sluggish action, the bias remains upside. The market will have its down sessions as the Fed will let it test, but again, if things get too dicey and threaten the status quo that helps placate the masses with rising markets while letting the government spend with weaker dollars, then the Fed and the PPT step in. Right now, they did their job and we are waiting to see if this rally to new highs continues or is again reversed as it has been on so many occasions, starting the cycle over once more.

Have a great evening!

Jon Johnson, Chief Market Strategist
InvestmentHouse.com
______________________________________
Alert Key
http://www.investmenthouse.com/alertkey.htm

PLEASE DO NOT REPLY TO THIS EMAIL. USE THE CONTACT US PAGE ON OUR WEBSITE.

Customer Support: http://investmenthouse.com/contact_us.php