Okay, more of the usual I suppose. Politics, domestic and across the globe, continue to provide a colorful and somewhat daunting backdrop to a stock market that, despite a bit of recent weakness, continues trending higher. North Korea launching longer and longer range ICBM's, the Trump administration saying not to worry, that 'we always handle it.' China says it is 'upset' that the US looks to it to rein in the guys in dark pajamas.
Maduro in Venezuela says he won an election no one thinks he could have won. How those dictators can win is just so mystifying, right?
Russia expels over 700 US diplomats as a result of the US sanctions bill.
Quite the backdrop, but stock futures were upside anyway. At least until the open. As soon as the bell rang stocks dropped. Tried to bounce on some pretty bad Chicago PMI data (58.9 versus 60.0 expected versus 65.7 June). Bad news is good news, remember? With the Fed on the market's side again investors can handle the bad. Apparently.
Stocks bounced, traded flat for 3 hours, rallied upside into the last hour, flipping positive. Didn't hold for all indices, however, as stocks faded the last 20 minutes of the session.
Apparently there is only so much bad news a market equating bad news with good news can handle.
SP500 -1.80, -0.07%
NASDAQ -26.56, -0.42%
DJ30 60.81, 0.28%
SP400 -0.09%
RUTX -0.29%
SOX -0.72%
VOLUME: NYSE +30%, NASDAQ +1%. NYSE trade jumped back above average as SP500 jumped higher then faded to negative. And as RUTX sold again. NASDAQ trade edged higher as it gapped upside then faded.
Advance/Decline: NYSE 1.1:1, NASDAQ -1.2:1. Nothing here to indicate things were weaker than the point totals suggest.
The start of something more nefarious? After all, NASDAQ and SOX are down 3 straight sessions. DJ20 transports, held its new high for almost two weeks but after a test, plunged lower last week to the 200 day SMA. With the Fed behind the market, how can that be? Kind of strange is it not, that the market watchers are so thin skinned? NASDAQ did drop on sharp volume Thursday while the midcaps beat the market to the punch, starting the selling a day early for its own 4-day decline. The initial turns were those infamous post-new high reversals.
Even so, the indices are holding near support with trends still in place. Some good leadership patterns remain. Indeed, quite a bit remain.
The deciding factor, outside the Fed and PPT, however, could be the chips. SOX is holding at the 50 day SMA but many semiconductors have turned over or are threatening to do so. MU, CY, AMAT, SIMO, AMD, XLNX are struggling. AVGO at support. On the other hand, MXL, SMTC, MLNX, MRVL are at support and perhaps if the others fall these are ready to step into their place.
In sum, the market is showing some wear immediately after punching the ticket on new highs. The Dow keeps marching to higher highs, but that is thanks to mostly one stock, BA. This new high stage fright has happened before and so this immediate reaction is familiar. The market sells back, but each time there are new chips and other stocks that step up to lead once the Fed and the PPT assure investors there is no major selloff in the works. The real shocker will come when the algos flip to selling rallies and not buying dips. That is one reason the Fed and PPT remain diligent to thwart any of the more serious looking selloffs before they get to a point where even those two cannot withstand the flood.
A lot of stocks Monday started higher but then tossed the gain. Some bucked the trend, e.g. HTHT, SOHU, C. Good to see some stocks working well as the market overall struggles a bit. Good also to see numbers of stocks holding good patterns and setting up well even as the market struggles a bit. That makes this, for now, look like another one of those new high stage fright selloffs that, if the pattern holds, get bought.
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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