Market Analysis and Summary
The DOW finished a bit above its 50-DMA on Friday, while the NASDAQ and S&P 500 continued to fall even further below theirs, however slightly. The laggard Russell 2000 declined the least, but spent its second consecutive session trading below its long-term 200-DMA.
The last time the Russell 2000 traded below its 200-DMA was back on 6/27/16 and 6/28/16, although it quickly and powerfully recovered on 6/29/16 and has been trending higher ever since. The distribution count remains unchanged at 9 days on the NASDAQ and 5 on the S&P 500.
Leading growth stocks aren’t exactly the picture of health right now, but given the current state of the general market, their overall action isn’t all that concerning either. We have yet to see a flight to quality, or any sort of major rush into highly defensive names. Gold attempted to breakout, but failed miserably on heavy volume.
No doubt, many leaders need time to consolidate their most recent gains. Fortunately, the process of healthy rotation has been and remains alive and well. So, new leaders have begun to break out of constructive bases, many of which began to form before the general market rolled over and started to decline a few weeks ago.
Continue to maintain a defensive posture and minimal exposure, while we wait for a few more cards to come out of the deck. In the meantime, pay close attention to the action of the market’s leading growth stocks and keep track of the most fundamentally sound and powerful names, for when the time comes to start buying again.
Active traders should keep in mind, that the put/call ratio has closed at levels that often coincide with market rebounds over the prior 2 sessions. Also, the McClellan Oscillator is hooking up from oversold levels. Nothing stops these indicators from becoming much more extreme from here, but short sellers should be aware and be careful.
The NASDAQ fell 0.09% as volume declined, spending its second consecutive session below its 50-DMA.
The Russell 2000 fell 0.08% as volume declined and finished below its long-term 200-DMA for the second consecutive session, although it bounced at logical support and closed well into the upper half of its range for the day.
The S&P 500 fell 0.18% as volume on the NYSE expanded, narrowly escaping further distribution, although it closed in the lower half of its range and below its 50-DMA for the second day in a row.
The DOW fell 0.35% as volume declined and found support just above its 50-DMA.