Market Analysis and Summary
The major indexes sold off on heavier volume across the board yesterday, adding further distribution to both major indexes. This brings the count to 6 days on the NASDAQ and 3 on the S&P 500. On one hand, we have a growing distribution count and an extremely volatile general market environment. Leading glamour names, AAPL, GOOGL and NFLX have been struggling below their 50-DMA’s and the leading semiconductor names have been torpedoed over the last several sessions, i.e. AMAT, LRCX and AVGO. So, it’s easy to see why caution is advised until we see how this all pans out.
On the other hand, the market’s other leading industry groups have picked up the slack, especially the financial stocks. Also, most of the leading medical/biotech stocks remain in good shape and continue to make constructive progress. Remember, it wasn’t that long ago that the financial and building stocks were struggling below their 50-DMA’s and now they are leading the market higher. Keep in mind, it’s not unusual for a stock to dunk below its 50-DMA as it base builds/consolidates.
Over the last several sessions traders have been forced to raise a good amount of cash. As we discussed in the last report, the idea is to lean your portfolio down to your core positions. Non-core positions in the portfolio that are healthy, constructive and exhibiting notable relative strength can also be held. Otherwise, we would maintain a defensive posture and minimize exposure while we wait to see how things shape up from here.
NOTE: Due to the July 4th holiday and shortened trading week next week, the next report won’t be published until Wednesday July, 5th 2017.
The NASDAQ fell 1.44% as volume expanded, finished the session slightly below its 50-DMA and in the lower half of its range for the day. This brings its distribution count to 6 days.
The Russell 2000 fell 0.64% on heavier volume, but finished the session in the upper half of its range for the day and just slightly below recent all-time highs.
The S&P 500 fell 0.86% and closed in the lower half of its range for the day as volume on the NYSE expanded, adding its 4th distribution day. However, it found support at its 50-DMA, bounced and closed well above.
The DOW fell 0.78% as volume expanded and finished the session below mid-range. However, it closed well above prior highs and its 50-DMA.