Market Analysis and Summary
Within the first hour of the opening bell yesterday, the S&P 500 and DOW slipped below their 50-DMA’s and joined the laggard Russell 2000, which has been struggling to reclaim this key moving average since January. The NASDAQ was the only major index left trading above its 50-DMA and not by much. However, by about 11:00 am EST, the major indexes found their lows for the session and began to rally. By the time the closing bell rang, the S&P 500 and DOW managed to rejoin the NASDAQ back above their 50-DMA’s and with about a minute to go in the session, even the Russell 2000 momentarily poked above his key moving average, but ultimately finished a hair below.
The NASDAQ, S&P 500 and DOW all finished the session slightly lower, but closed near their highs for the day, as volume expanded across the board, which is indicative of accumulation. Only the Russell 2000 finished in the black yesterday, yet closed ever so slightly below its 50-DMA. Overall, this was a constructive day for the major indexes, although sitting through a shakeout like this is difficult enough in its own right, notwithstanding North Korea threatening a nuclear attack.
Leading growth stocks were volatile yesterday, but they made it through the end of the session without any major scars. Chinese tech names were among the most volatile, but this is characteristic of their price action, we don’t count it against them. Otherwise, leading stocks in the technology, medical/biotech, residential building and building related sectors continued to trade in a healthy and constructive manner. It still appears as if money is continuing to rotate into the residential homebuilding and building related stocks, such as PHM, LEN, DHI, TOL, CCF, BLD and GCP. Many of the stocks that were leading the financial sector appear to be waiting on earrings. C, JPM, WFC and PNC, all report before the opening bell this Thursday, 4/13.
We would continue to maintain a cautious stance, but if the general market and its leading stocks continue to exhibit constructive behavior, we would begin to build long positions as entry points develop. As always, be persistent in your process of eliminating laggards and taking at least partial profits on extended names. Remember, “buying right” and maintaining a lean and mean portfolio is your number one defense and what ultimately allows you the ability to sit still, when the general market environment becomes volatile.
The NASDAQ fell 0.24% as volume expanded, which technically meets the definition of distribution. However, it staged a positive reversal off of its 50-DMA and closed near its high for the day, which is indicative of accumulation, not distribution.
The Russell 2000 rose 0.72% as volume expanded and closed near its high for the day, but ever so slightly below its 50-DMA.
The S&P 500 fell 0.14% as volume on the NYSE expanded, although it shook out constructively below its 50-DMA and closed near its high for the day, which is indicative of accumulation.
The DOW fell 0.03% as volume expanded, although it shook out constructively below its 50-DMA and closed near its high for the day, which is indicative of accumulation