Market Alert - The Close

The stock indices were generally lower but only NASDAQ and SOX were really struggling. The other large cap indices tested lower but held near support and recovered with modest losses. RUTX and SP400 actually closed higher on the session, a session that saw a lot of stocks reach lower though there were some recoveries.

SP500 -5.56, -0.22%
NASDAQ -56.33, -0.88%
DJ30 -53.50, -0.24%
SP400 0.18%
RUTX 0.08%
SOX 0.18%
NASDAQ 100 -1.10%

VOLUME: NYSE +17%, NASDAQ +25%. NYSE trade was up, but the small and midcaps posted gains while SP500 and DJ30 rebounded nicely off 20 day EMA and 10 day EMA tests, respectively. No distribution there. NASDAQ on the other hand did show distribution as stocks were sold much harder, but it also managed to hold onto the 50 day MA, and higher volume there is not necessarily a bad thing.

ADVANCE/DECLINE: NYSE 1.3:1, NASDAQ -1.3:1.


Not all stocks recovered, however, and it looks as if there was some clear rotation out of larger cap techs and chips. As for NASDAQ, the heaviest selling was in the large caps as NASDAQ 100 fell over 1%. The FAANG stocks that had held out of the selling the most, FB and NFLX, were sold the most. They were not alone as other large caps NASDAQ stocks sold as well, e.g. CRM, TTWO, BABA -- many that performed the best of late were sold the hardest.

At the same time, many that performed well up to Monday continued to do so. Manufacturing. Transports. Chemicals. Financials. Biotechs/Drugs. Sure some were off their feed a bit but not bad at all.

The indices showed similar action: some down and could not get up, others rebounding smartly off of near support. Regardless, however, ALL indices managed to hold a solid support level. Whether NASDAQ and SOX can continue to do so remains to be seen, but as of Monday, the indices held the line -- one or another. Stocks, well, there were some sharp breakdowns.

The GOP attempt to replace the ACA has been declared dead. North Korea says the US has declared war against it. Herr Merkel won German chancellor again though by a much narrower margin and the anti-immigration group won more positions than expected. No real change I suppose in any of these areas. The most interesting event to come will be how the Spain/Catalonia situation resolves. Spain is adopting strongarm tactics to even prevent the referendum on secession, something you can understand if you are Spain, something you curse if you are Catalonian. Oh, and there is Monday Night Football with the Cowboys and Cardinals. Who will protest tonight? Good grief.


This action certainly has the look of a pullback, but not a breakneck, sell off the entire market drop. After some new highs and a bit more icing on top, the indices are testing and most stocks are not getting ripped wide open. Some leaders ARE getting sold aggressively, however, as some money appears to be rotating. Thus we sold out of many positions in leaders that found themselves experiencing a bit of Wiley Coyote, i.e. running over the edge and starting to drop. Perhaps they find some support and set back up while other areas receiving some of the rotating money break higher from promising patterns. Indeed, we picked up some upside positions on stocks making those breaks higher, e.g. CONN, IMMU, BLRX. We tried YY as it continued higher early, but then the sellers took shots at the China stocks as well. If the rally is to continue, however, this zero sum game rotation from one area to another with no new money coming in is the type of move that looks to be setting up.

Have a great evening!

Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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