Market Alert - The Close

The next move for stocks was not higher after that 3-session lateral move to end the week. We felt the resolution to this lateral move following the Tuesday upside gap and reversal would come this week. It didn't wait. Before the open stock futures were solidly lower, NASDAQ leading the way in percentage terms.

Tech in general was slammed as FB is part of a data mining operation by another entity that gathered information from FB, information FB says the entity should not have had, but about which FB did nothing. At a minimum bad optics. With use already down 25%, this is not the kind of news investors welcomed as the way to get that 25% usage back. FB was slammed and it took techs with it.

It did not that reports said AAPL was attempting to make its own screens for future products -- in 3 to 5 years. Suppliers were hit, and again, tech in general. If APPL does it then who next, right? Better sell now, 3 to 5 years ahead of time, right?

Then GS said TSLA deliveries will fall and that TSLA will reduce its guidance. Just no good news.

Futures were already down, and those stories were extra gasoline tossed on the fire. Stocks gapped lower then sold steadily lower into midday. A double bottom set up from lunchtime to mid-afternoon and the indices then rebounded the last 1.5 hours to mitigate the sharp downside. It came nowhere near turning any index positive, but there were some technically interesting holds at support by the indices and leaders.

SP500 -39.09, -1.42%
NASDAQ -137.75, -1.84%
DJ30 -335.60, -1.35%
SP400 -0.93%
RUTX -0.98%
SOX -1.95%

VOLUME: NYSE -66%, NASDAQ -24%. Of course a hefty volume drop after that big expiration volume surge.

ADVANCE/DECLINE: NYSE -3.6:1, NASDAQ -2.7:1. Hefty downside breadth as the majority of sectors were sold though there were groups that showed strength, e.g. transports.

The market is not in a good mood and even good stories are not received well. That happens when the mood changes. Perhaps investors and traders reached a saturation point with the continual parade of news stories about FBI corruption, investigations of everything in the government, and the seeming unlimited time this can all continue.

More and more people I talk to are sick of our government. Sick of the spying, the lying, the disrespect for the votes of the individuals, the politics dragged up every time there is a key event in the country, good or bad. It is not specifically about Trump, it is not specifically about the democratic opposition. It is the notion that the government is entirely out of control in every aspect from spending to spying to graft to corruption and more. It is hard to get enthused about earnings valuations when there are so many headwinds and tentacles trying to drag everything down.

The indices were down, but SP400 and RUTX did manage to recover to less than 1% down. That is not a bad move considering the entire market was in a raging selloff and all indices were down well over 1%, NASDAQ and SOX down over 2%.

At the session close, however, there were moves off the lows that left the indices in various states of decline.

SOX gapped below the 10 day EMA, sold below the 20 day EMA, but then rebounded to hold the 20 day on the close. Big reach lower below midrange, then a recovery to mid-range support. Perhaps that was enough of a shakeout to put in a higher low inside the channel; that can lead to renewed upside and breakouts, but after the gap lower, there is likely a bit more work to do.

NASDAQ gapped below the 10 day as well, sold to tap the 50 day SMA, then recovered some lost ground. It too is about midrange in what looks to be its channel, trying to find support at the 50 day MA and avoid the need to test that early February low. Can put in a higher low here; not holding the breath just yet.

RUTX sold off to the 50 day SMA then rebounded quite nicely to hold near the 10 day EMA on the close. Some serious buying came in that pushed RUTX 16 points up off the low, cutting the losses in half. Still interest here as it traded just off the late January 2018 high.

SP400: Tested the 50 day EMA on the low, rebounded to hold the 20 day EMA and 50 day SMA. This also keeps SP400 over the early December high and December consolidation. Okay, it too found some buyers at that pretty solid support.

SP500: Gapped downside, sold through the 50 day EMA, held the trendline drawn from the early February closing low and the early March low. Okay, it held and bounced back just a bit, but it was nothing major. At best, still an upward pointing wedge, and if SP500 can bounce toward the upper trendline at 2800, a nice move, you still have to watch for a breakdown from there.

DJ30: Sold, not aggressively, holding 24,500 on the low, bouncing modestly to close. Still in the triangle/pennant pattern, still at the lower trendline of the pennant/triangle. Unlike SP500 and its upward pointing wedge, this one is more neutral, meaning it has to show which direction it will go. The current market mood is sour and DJ30 looks less than strength. Nonetheless we will see which way it breaks.

Leadership

Most everything closed lower, but many leaders held support as they continued lower. AMZN, NFLX, NTES, ATHM, MU, LRCX, NVDA, ETSY, PII, SQ -- holding up very well indeed. Transports, notably trucks and some airlines, were solid.

Yes many leaders held up well enough, but right now that is about all of the positive there is. It would be great if Monday was a shakeout that leads to new buying, but there is nothing to indicate that is the situation just yet.

Thus, we closed positions that were giving up support, leaving those that still held their patterns/trends and support. I still like many of the leaders in terms of their patterns, whether the old guard or some new patterns in a group that had to take some time off (e.g. truckers), but they have to prove they can hold and then show then can make solid upside moves. Today some held and that was a bit encouraging, but there is more to be done to warrant putting money to work.

Have a great evening!
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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