Market Alert - The Close

Two solid sessions upside then futures softened. A softer open, a pause after a run is typically not a big deal. It wasn't today. Stocks opened lower and immediately moved upside. It was not a straight run upside, but it was enough to flip all but SP400 positive by the close.

SP500 1.89, 0.08%
NASDAQ 5.91, 0.09%
DJ30 39.39, 0.18%
SP400 -0.16%
RUTX 0.24%
SOX 0.16%

VOLUME: NYSE +7%, NASDAQ +11%. Good to see volume advance back to above average as stocks tested lower early then recovered. Not a huge reversal, could be interpreted as churn, but the volume and price action go with the market's pattern, and that suggests upside.

ADVANCE/DECLINE: NYSE 1.1:1, NASDAQ 1.2:1. Very pensive today, but flipped from negative to positive as the market recovered off the lows.

Not a great day of course, but it is very much in line with a market that surged higher off a test for two sessions, now pausing. Many leaders paused on the session, but other stocks picked up the slack. China stocks were still solid, some chip stocks jumped, and retailers and financials helped out again, retailers thanks to a story of JWN getting taken private. Picked up enough slack to keep things from tanking, and then when the market's leadership groups rebounded, the indices turned positive. Not a great day, but it worked.

The indices added some upside but nothing that shows a new strong surge that changes the market's MO of rallying to new highs, adding some more, then selling back. So, nothing has changed in terms of our market view: a rally to new highs, another week or so of upside, then the algorithms kick in and sell things back down to start the cycle again.

At the same time there is more than a bit of euphoric talk about how now, this time, the market is going to continue the move. Have our doubts. It can happen; of course it can. It hasn't shown it has changed yet.

The action in our positions is good enough to let the move continue. We did bank some gain on MVIS and XXII as they hit their targets, and after two weeks of upside SINA showed a doji; took some solid profit. Everything else we let work; they are not showing signs a selloff is imminent.

Did not buy any new positions. Many stocks did not do a lot, no surprise, and after the indices hit new highs and the pattern indicating there are not that many more upside sessions ahead, we did not want to move in. That said, we wish we picked up some more BABA as it broke higher again; of course the time to buy new was Monday when BABA broke higher off the 20 day EMA. At least we still have two positions on it now.

With futures lower afterhours it may be the market has another opportunity to prove the bids are stronger. If NKorea is the issue, it has caused some selling in the past. The question is whether this is the end of this leg, starting the pullback that takes back a lot of the move and resets for a new move higher. Thus, continue looking to take gain if it is there and if good moves start to stall.

Have a great evening!

Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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