Market Alert - The Close

An afternoon recovery, and specifically a last minute spike, managed to close DJ30 over 22K. The Dow actually gave up 22K in the afternoon and needed that last push to hold it on the close. It even managed to turn SP500 positive as it was red just before that last late push upside on the close.

SP500 1.18, 0.05%
NASDAQ -0.29, -0.01%
DJ30 52.12, 0.24%
SP400 -0.69%
RUTX -1.06%
SOX -0.66%

AAPL of course was the prime driver, but it was very curious how the AAPL related chips performed. SWKS gapped sharply upside but then reversed to close flat. AVGO gapped and managed to hold onto a good part of the gap, but reversed well off its intraday high. Other chips that rallied the prior 3 weeks sold hard. LRCX crashed 3.75% through the 50 day MA's. AMAT did the same, dropping 3+%. XLNX dove lower again by 2%.

Even so, the stock indices managed to hold their position or at least hold some support.

DJ30 of course pushed to a higher new high, gapping to a doji, its second doji gap upside.

SP500 gapped higher, sold back to the 20 day EMA, then recovered in the afternoon along with the other indices, managing a positive close over the 10 day EMA with a late upside push. SP500 continues riding along the upper channel line of the channel formed off the March 2009 low. Not breaking through, not falling away. Will it break through? Doubt it, but thus far it is comfortable riding that trend over the 10 day EMA. If all of these great earnings don't break it over that level, I would say it will fade from there to test. Wow, what a daring call . . .

NASDAQ was also aided by AAPL, but that could not keep it positive on the session as it too gapped higher then faded to test the 20 day EMA, bouncing back to flat in the afternoon session. Stronger, above average volume, but not sure if that means much of anything with this action. Held the June prior high and bounced but could make no headway because a lot of other NASDAQ stocks struggled, particularly some big name chips. TTWO is up 9-10 clicks afterhours and perhaps that will help Thursday -- oh wait, AAPL's blowout didn't help -- never mind.

SOX gapped upside then reversed as well, but managed to hold the 50 day EMA on the low and the 50 day SMA on the close. It can still put in the right shoulder to an inverted head and shoulders even with that gap and rollover that many chip stocks showed.

SP400 did not gap upside, selling through the 50 day MA on the low. But it managed to recover to hold those levels on the close. That keeps SP400, despite the drop the past week, still in position to hold the same support and continue the trend higher.

RUTX knifed lower from the open, also undercutting the 50 day MA's. It managed a rebound itself, but much more modest on the comeback, closing just below the 50 day SMA. Ugly decline over the past week but regardless RUTX leaves itself in position to bounce off the 50 day support as well.

It could be that the indices make a new move higher off this test by the small and midcaps, the possible inverted head and shoulders by the SOX, SP500's bumping at the upper channel line, and NASDAQ's hold over the June peak. Many individual issues were struggling, however, and we closed some positions in drugs, manufacturing, China stocks (NTES) but left open the chip downside plays that are diving lower through support.

Afterhours another round of earnings are pushing stocks higher such as TTWO, DATA, both upside plays for us, and unfortunately for our downside play, TSLA. As AAPL showed today, however, earnings are not on their own driving the indices as most went nowhere despite the AAPL earnings. Of course the Dow can be driven by just one stock and thus it IS being pushed by earnings.

The one concern is the sharp drop in many heretofore solid stocks, e.g. several semiconductors that were in good moves but after a test they just continued lower through key support. Everyone is so pleased with DJ30 22,000 and believing that the path of least resistance is up, you have to watch these stocks such as the chips as they tend to be market leaders, and if they break the market has a major leadership group as a drag.

For now we will make some money on TTWO and a bit on DATA, then see if TSLA runs out of batteries as we watch how SOX, AMZN, GOOG, drugs, and some China stocks try to hold support and at the same time watch FB and AAPL for possible new upside plays.

Have a great evening!

Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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