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Monday, May 7, 2018

Market Alert - The Close

Monday continued the Friday upside in many of the same ways, one of the primary being the utter lack of serious volume. NYSE, NASDAQ, and DJ30 all showed lower, below average trade, all lower than Friday's already absurdly low volume. There were some stocks rising on good volume. Some defined as very few. BABA. HTHT not bad. WUBA, YY solid. RHT, FFIV, NOW, ULTI solid trade.

See a theme? The few leadership groups that are making good on their good patterns are being purchased on volume. Most everything else is not. That is great for those stocks, but they are not the market. We are playing them of course, but knowing that the rest of the market is not following with strong buying.

The indices made the next move. First, they tested the lows in the pattern or trendline, reversing Thursday with doji. Second, they rallied forth with great price moves and low volume Friday. Monday they continued the upside into the next, and very important resistance.

SP500, DJ30, and SP400, all sporting triangle patterns that used the 200 day SMA as support, rallied to the upper trendline of the triangle pattern. That put SP500 and DJ30 at the 50 day MA's and the upper trendlines of the triangles.

SOX gapped to the 50 day EMA, tried to move through, faded to close just below that level.

NASDAQ gapped through the 50 day SMA, tapped the April closing high, backed off 27 points to close (1/3 of the gains on the session high). NASDAQ held its lower trendline and rallied through the 50 day MA's. For NASDAQ, however, the first key level is the April high that is also the mid-Marcy lower gap point. 7200 looks like serious resistance.

RUTX was quite similar to NASDAQ, surging up to the April closing high then backed off to the close though just a modest fade from the highs. RUTX led the market again, a good sign for the economics ahead -- if it can continue leading upside. Thus far, at least with the moves the past two sessions, RUTC is taking up the leadership quite nicely.

SP500 9.21, 0.35%
NASDAQ 55.59, 0.77%
DJ30 94.81, 0.39%
SP400 0.55%
RUTX 0.85%
SOX 0.91%

VOLUME: NYSE -1%, NASDAQ -5%. Already pathetically low volume Friday was even lower Monday. The buying is successful not by numbers pouring in, but the lack of sellers on the bounce off support. It would not take much to upset the move.

ADVANCE/DECLINE: NYSE 1.7:1, NASDAQ 1.6:1. Even with the small caps leading breadth was pathetic.

Okay, so another less than powerful move upside in good patterns. Wanted to see better volume in the patterns to show serious buying that could lead to new breakouts. Thus far, not there. Some areas as noted are receiving volume and those are what we are focusing buys on, but the market overall is vulnerable.

Now there is a serious test of the move after two solid upside sessions (price-wise, that is). Thus far growth is leading the move higher with RUTX and NASDAQ -- a good thing -- with both already clear of a serious resistance level though they have their own issues with the April rebound high. It will take leadership to hold the move and make the next break. There is certainly leadership in those groups mentioned earlier, and there are great patterns in oil, retail, and some drugs, but they all have to come together as leaders and broaden enough to pull the entire market. No big deal, right?

Still very skeptical of the move given the pathetic volume and narrow leadership. This next resistance is a key level. If SP500, DJ30, and SP400 can move through it, good. If they show some decent volume, great. Not holding our breath over here, but we are playing the solid leaders, e.g. China stocks, software, and hopefully retail and oil, as they make their moves. We would like to play some big names as well such as AMZN, VMW in addition to the plays on NFLX, FFIV. We will, if they can continue moves and show at least a modicum more volume.

Have a great evening!
Jon Johnson, Chief Market Strategist
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