Market Analysis and Summary
On Friday, the major indexes finished the session slightly lower, except for the Russell 2000, which managed to eke out a small gain. Volume rose across the board, adding distribution to the NASDAQ and S&P 500. The NASDAQ didn’t meet the classical definition of distribution because it closed down less than 0.20%. However, its rally stalled at session highs and closed below mid-range as volume expanded. This is considered a stalling or churning day, which is a subtle form of distribution. Technically, this brings the distribution count to 6 days on both major indexes.
The distribution count continued to grow on Friday, although this is not being reflected in the action of leading growth stocks. Technology, medical/biotech, residential building and building related stocks continue to chug along in a healthy manner. Meanwhile, leading financial and steel stocks are still largely trading below their key 50-DMA’s, but for many, just one or two up days from here would quickly resolve this issue. JPM, WFC, PNC and C all report earnings before the open on 4/13, so keep an eye on these names as we get closer to their reports for possible clues. The thick of earnings season begins on Monday, 4/17.
Tracking distribution days is an important part of the overall process, but analyzing the health and breadth of leading growth stocks, is where our focus should be. The market’s leadership is currently in fine shape. Some leaders are consolidating their most recent gains, while others are breaking out of newly formed, constructive bases and making worthwhile progress. So, continue to build long positions as entry points develop and be persistent when it comes to 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 stalled at session highs Friday and closed down a scant 0.04%, however, it finished the session below mid-range, as volume expanded. This is considered a stalling or churning day, which is a subtle form of distribution.
The Russell 2000 rose 0.26% as volume expanded and continued to make progress through short-term resistance.
The S&P 500 fell 0.23% as volume on the NYSE expanded and added a distribution day to its count.
The DOW fell 0.31% as volume expanded and closed below its 10 and 21-DMA’s but well above its 50-DMA.