More impressive earnings from DJ30 and similar stocks, e.g. BA, KO, TXN, V set the stage for a move higher, but the market did not respond. Futures were muddled and mixed and stocks sold at the open to midday. An intraday inverted head and shoulders formed and stocks recovered in the afternoon session, but no index made it positive. A nice recovery off a test of a bit lower support with most indices easily holding their trends, holding that near support.
SP500 -11.98, -0.47%
NASDAQ -34.54, -0.52%
DJ30 -112.30, -0.48%
SP400 -0.58%
RUTX -0.46%
SOX -1.29%
VOLUME: NYSE +16%, NASDAQ +19%. Volume up on selling and then a recovery. Some distribution, some buying on the selling. Overall, the indices are down on some higher selling volume.
ADVANCE/DECLINE: NYSE -2.9:1; NASDAQ -2.1:1. Pullback numbers.
It is rather clear the stock market is in a bit of a pullback after running into earnings, and earnings, despite some impressive beats by the mega-caps, are not pushing stocks higher overall. Individually of course, but as a group stocks are less than enthusiastic about the upside. As the earnings come out there is some profit taking and stocks are sliding back. Sliding is the operative word: they are not dropping, plunging, diving -- at least not as a group. Thus far a very normal pullback to near support after good rallies into results.
The intraday action is interesting as it shows the fight between the buyers and the sellers. GS is back and forth, breaking higher Friday, testing Monday, back up Tuesday, and gapping higher Wednesday on those stronger interest rates. Then GS reversed and sold off to the 10 day EMA in a rather impressive intraday high to low swing.
On the other hand, several stocks that sold off through midday rebounded; obviously so given the indices rebounded. GOOG, FB, AAPL tested lower but caught a bid back upside to at least cut the losses.
Then there were those that did not find the returning bids, e.g. XLNX, GS as noted, BABA, GLUU. It happens in pullbacks.
So, yes there are stocks testing and thus the indices are testing. All managed to come back and hold near support.
BIGGER PICTURE, note how the earnings have not driven the indices higher as some big names have reported. Already at a saturation point? With the indices having run higher into earnings, even with some impressive results, non-GAAP of course, the indices are not screaming higher and indeed are struggling just a bit with some volatility. As of Wednesday afternoon, however, the bids are still returning as the BTD faithful keep the faith.
CHARTS
RUTX tested below the 20 day EMA, hitting a new fade low, but it rebounded to hold the 20 day on the close. Lower close, higher volume shows overall selling, but a solid enough recovery that regained 11 points from the 18 lost on the low.
SP400 midcaps reached just below the 20 day EMA on the low, rebounded to close, closing below the 10 day EMA but in the 4 week range. Sold but found buyers and recovered more than it lost here as well.
SOX tested below the 10 day EMA for the second time in 5 days, recovering to hold the 10 day just as it did before. The trend up the 10 day EMA continues as chips worked through a more volatile patch. So far the trend holds even as stocks such as AMD drop out and stocks that rallied well such as XLNX are rolling over.
NASDAQ volatility continues. It undercut the 20 day EMA and dropped 80 points before recovering 45 to close. That closed it near the 20 day EMA. Looks as if NASDAQ wants to test the 6500 level (closed at 6564) a bit closer. That would be a nice reset for a continued upside move.
SP500: The large caps also dipped, holding the 20 day EMA on the low then rebounding to close near the 10 day EMA. Volume was the highest in 4 weeks on some selling, some buying on the dip. Nice recovery but would not be surprised of SP500 tests a bit more and puts in a more normal drop to the 20 day EMA, even the old 2009 upper channel line at 2525ish.
DJ30 faded but it was nothing, not even coming close to the 10 day EMA. Modest rebound, still in good shape.
On the day we took some gain ahead of earnings for a few positions (CELG, STRP, UCTT), closed some others such as GLUU, SOHU, AMD, and bought some BOX and SFUN upside with some KSU puts downside.
For Thursday it is a matter of the buy the dippers coming back again after a short dip. The market still has some more testing to do most likely, and it is important to recognize that likely stocks will continue the pullback even as the BTD players remain more than willing to step in. Enough stocks are not recovering off the lows to continue a drag on the overall market. Once the pullback runs its course there will be many more good entries versus much of what you see now, i.e. stocks that moved higher just making a quick intraday test and bouncing. Those are the ones that can frustrate you as they bounce off the lows but continue to trend lower until the test is over, making you wait in that position you just took.
Have a great evening!
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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