Market Analysis and Summary
Last week ended on a quiet note, despite the extremely volatile session we saw on Thursday. The major indexes held up constructively as volume declined across the board on Friday and they are all still trading at or near, recent all-time highs. The distribution count held steady at 2 days on the NASDAQ and 3 on the S&P 500, which is hardly a concern.
Quick, volatile shakeouts have become a common occurrence lately and when they occur, it’s very easy to let your emotions get the best of you and get shaken out of well bought positions. This is why it’s so important to pay close attention to the health and breadth of the market’s leadership, which fortunately, is not a concern at the moment.
However, if stocks highly defensive in nature start to rally, like food, beverage and utility stocks and/or, we see a general “flight to quality,” where investors seek refuge in much less risky investments, like treasury bonds and gold, then it’s time to become concerned and operate defensively, until evidence to the contrary presents itself.
We have a busy week of economic numbers ahead of us, the most highly anticipated being, the nonfarm payrolls number due on Friday. Not to mention, we still have the bulk of earnings season to get through over the next few weeks.
Nevertheless, the line of least resistance remains higher. So, continue to build long positions as entry point present themselves, however, slowly and with the utmost selectivity. Remember, “buying right” is critical. Don’t buy a stock more than 1-2% past its pivot point and get into the habit of eliminating laggards and taking at least partial profits on extended names.
NOTE: Check when a company is due to report EPS, before initiating a position. These dates change frequently and sometimes at the last minute, so double and triple check to be sure.
The NASDAQ fell a scant 0.12% as volume declined and finished the session above logical support, easily avoiding distribution. However, it closed below its short-term 4-EMA and 10-DMA, which have begun to roll over.
The Russell 2000 fell 0.30% as volume declined, closed above its 21-DMA and only slightly below recent all-time highs.
The S&P 500 fell just 0.13% as volume on the NYSE declined, so further distribution was avoided.
The DOW rose 0.15% as volume declined and closed at a new all-time high for its third consecutive session.