Market Analysis and Summary
The major indexes finished Monday’s shortened trading session modestly mixed, yet clearly divergent. The NASDAQ was the only index to finish lower on the day and below its 50-DMA. Meanwhile, the Russell 2000 finished the session at a new all-time closing high, the DOW made a new all-time high, but closed slightly back below and the S&P 500 closed slightly higher for the day, well above its 50-DMA and just slightly below recent all-time highs. Fortunately, volume declined across the board, although that was largely due to the shortened trading session.
In the land of leading growth stocks, large-cap glamours, AMZN & FB joined GOOGL, AAPL and NFLX below their 50-DMA’s. Leading semiconductor names continued to get torpedoed, such as AMAT, LRCX and AVGO. Additionally, a host of other well know, leading tech names closed below their 50-DMA’s, like ANET, OLED and COHR to name a few.
On the flip side, leading financial stocks have recently come back into the limelight, while leaders from the the residential building and building related groups continue to make new highs. Also, there are plenty of constructive bases forming in the medical/biotech area of the market and it doesn’t hurt to see the transportation index confirming new highs in the DOW. Also, keep in mind that it is completely normal for a leading stock to trade below its 50-DMA as it base builds/consolidates.
Stay in tune with the market’s leadership, paying especially close attention to the process of rotation. Is the money coming out of tech it finding its way into the market’s other leading industry groups? Or, are the market’s other leading industry groups starting to follow leading tech names lower, as investors run for cover and hide in highly defensive areas of the market, like the utility and food/beverage stocks? Only time will tell. Until then, we would maintain a defensive posture and minimize exposure, while we wait to see how things shape up from here.
The NASDAQ fell 0.49%, finished near its low for the day and closed below its 50-DMA. Fortunately, volume declined and it didn’t make a lower low, despite ending the week with an outside day, or bearish engulfing pattern.
The Russell 2000 rose 0.80% and finished the session at a new all-time closing high, although volume declined.
The S&P 500 rose 0.23% and finished the session slightly below recent all-time highs, although it ultimately stalled and closed near its low for the day which is indicative of selling. Fortunately, volume on the NYSE declined, lessening the severity of its negative price action.
The DOW rose 0.61% and made a new all-time high, although it closed slightly back below, as volume declined.