Market Analysis and Summary
The major averages finished the session slightly higher yesterday, except for the Russell 2000, which ended down a hair. Volume declined across the board, so distribution was avoided. IBD shows the distribution count at 3 days on the NASDAQ and 5 on the S&P 500, which is a manageable level.
Action among leading growth stocks was mixed, but healthy and constructive overall. A couple big leaders in techland, NVDA and NTES, broke sharply below their key 50-DMA’s on heavy volume and closed near their lows for the day. Fortunately, their damage was fairly well contained. Most of the other stocks in their industry groups held up well, despite the mass exodus from these two specific names. If this sort of heavy volume selling were to become contagious and begin to spread through their industry groups and sectors, that would be cause for concern.
On the flip side, the strength and power behind TSLA and AMZN’s moves to new all-time highs over the last couple sessions was encouraging. As long as new stocks continue to emerge to replace the broken ones while the market is consolidating, we don’t see any reason to become overly concerned.
So long as the process of healthy rotation remains in place and the general market holds up as it has been, we would continue to build long positions as entry points develop. However, we would be careful about buying stock on weakness. 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 rose 0.07% as volume declined and closed near recent all-time highs.
The Russell 2000 fell 0.11% as volume declined and closed back below its 50-DMA for the second consecutive session.
The S&P 500 rose 0.06% as volume on the NYSE declined and closed near its high for the day, yet below short-term resistance.
The DOW rose 0.19% as volume declined and finished the session below short-term resistance but above its 50-DMA.