Market Analysis and Summary
The major indexes exhibited wildly mixed action yesterday. The NASDAQ swung in a 142-point range and ultimately closed a bit below mid-range as volume exploded, adding a big distribution day to its count. Fortunately, 2 distribution days also fell off its count, for a net decrease of 1 day and the S&P 500 lost as a day as well. This brings the count to 2 days on the NASDAQ and 3 on the S&P 500. Meanwhile, the DOW closed up 85.54 points on heavier volume and closed at a new all-time high.
This divergence in the major indexes is largely due to market rotation. Money came out of many of the leading technology and medical/biotech stocks and found its way into some of the mortgage related, telecom related and retail stocks. Food, beverage and tobacco stocks also rallied and are typically considered defensive in nature. Therefore, it will be extremely important stay closely in tune with rotation among the market’s leadership as we move forward from here. Remember, the action of leading growth stocks will always provide the most valuable clues, especially when the major indexes are whipping around in a volatile manner.
Yesterday’s action was a shot across the bow. Any positions that were recently added to should have been sold, in addition to any losers and laggards. Other than well bought, core positions with plenty of profit cushion and stocks that held up extremely well despite yesterday’s heavy volume selling, we would minimize long exposure until we see how things unfold from here. Always keep in mind, cash is a position.
The NASDAQ fell 0.63% on heavier volume and added a distribution day, although it found support near prior highs, bounced and closed above its 10-DMA.
The Russell 2000 fell 0.60% on heavier volume, but found support at its 21-DMA and closed just slightly below recent, all-time highs.
The S&P 500 finished the session just 0.10% lower, near its high for the day and a hair below recent, all-time highs, as volume on the NYSE expanded. This is indicative of accumulation.
The DOW rose 0.39% as volume expanded and closed at a new all-time high.