THE MARKET:
While NASDAQ remains in its range on volume that is relatively in control and matching the action at the late April low, SP500 fell hard Thursday, undercutting the 1164 head and shoulders neckline and landing on the 200 day SMA on sharply stronger though still below average volume. The nascent attempts at extending the rally are in serious jeopardy on SP500. The other NYSE indices did not fare much better. SP600 fell to its 200 day SMA as well and DJ30, already below that level, has undercut near support and has nothing but air between it and 10,000.
As noted, NASDAQ is still sporting its laterally consolidation, handle if you will, to its double bottom off of the April low. SOX is also holding its range but below the 200 day SMA. SMH, the EFT for semiconductors, is in better shape as it looks ready to try a move off the 200 day. Techs are in the unusual position (at least for this year) of trying to lead stocks. That right there makes the entire situation suspect.
MARKET SENTIMENT
Bulls versus Bears: Bulls: 43.5% last week, down from 44%. Bears: rose to 30.4% from 29.7%. That puts bears right at the level hit in August 2004. That August date is important because that is when NASDAQ, SP500, SP600 bottomed and rallied to the end of the year.
VIX: 16.12; +1.67. Volatility is riding higher after making a higher low this month, but it is still over two points off even the recent bump higher.
VXN: 18.81; +0.94
VXO: 15.74; +1.96
Put/Call Ratio (CBOE): 1.1; +0.09. Another gain and another close above 1.0. A series of these closes indicates some oversold, overly speculative situations, but you also need to see the other sentiment indicators lining up as well.
NASDAQ
NASDAQ rallied to the 50 day EMA on the high but then faded to close lower on rising, below average volume. Held the 18 day EMA and the recent lateral range. That was the positive for the day.
Stats: -7.67 points (-0.39%) to close at 1963.88
Volume: 1.794B (+1.61%). Volume edged up again. NASDAQ is doing that 'rising volume on each session' routine that it showed in late April. Thus we are not viewing this as a serious negative as long as NASDAQ holds this consolidation.
Up Volume: 851M (-275M)
Down Volume: 915M (+327M)
A/D and Hi/Lo: Decliners led 1.69 to 1.
Previous Session: Decliners led 1.04 to 1
New Highs: 53 (+8)
New Lows: 86 (-9)
The Chart: The Chart: investmenthouse.com^ixq.html
NASDAQ was solidly higher, testing the 50 day EMA (1981), and then it fell over with the rest of the market and finished just off its lows. It did hold the 18 day EMA (1956) on the low, and that kept it in its range between the 18 day and the 50 day as it works on the handle to the short double bottom to end April. It is thus still trying to build for a break higher, and it may get some help from Dell and others Friday. The rest of the market, however, is working against it, or at least not providing it with any support in its efforts to hold on and break higher.
The large cap techs performed slightly better (+0.4%) as they traded between the 50 day EMA and the 18 day EMA on the highs and lows as well. It too is still moving in the lateral range off of the April lows, trying to find the support to move through the 50 day MA. Dell may give it some help early on, but DELL is more of a zero sum game as it takes share from rivals as opposed to enjoying a growing PC and related hardware market.
SOX tapped at the 50 day EMA on the high (401.34) as the chips managed a positive close Thursday, the only major index to do so. It is riding over its 18 day EMA as well as it tries to extend its move off of the bottom of its trading range at 380. The chips led Thursday, but they are basically along for the ride with NASDAQ, and if the techs don't move we don't expect SOX to do much icebreaking on its own.
SP500/NYSE
The large caps had taken the leadership mantle in this rebound, but it has yielded two distribution sessions in three (no accumulation session sandwiched in there as with NASDAQ) and is back to the 200 day SMA, fighting to hold on.
Stats: -11.75 points (-1%) to close at 1159.36
NYSE Volume: 1.573B (+11.33%). Volume rallied higher and though it was still below average, it was a clear distribution session (higher volume selling). Distribution shows big money moving out of stocks even though there was a positive volume rally. The volume has to stay positive to keep the rally alive.
Up Volume: 385M (-665M)
Down Volume: 1.603B (+880M)
A/D and Hi/Lo: Decliners led 2.54 to 1. With the small and mid-caps leading lower the breadth got out of hand on the downside.
Previous Session: Advancers led 1.28 to 1
New Highs: 68 (+2)
New Lows: 77 (+9)
The Chart: investmenthouse.com^spx.html
Tested the 50 day EMA (1173) on the high and then sank the rest of the session. It broke through 1164, the neckline of the head and shoulders pattern and the level it recaptured on strong volume the third session of May. It is now at the 200 day SMA (1158) once more, and this is where it makes a stand and continues the rebound or it fails. Given the volume selling Thursday, it is not looking too solid for a stand at this level.
The small caps tanked to the 200 day SMA (307.55) without firing an opposing shot Thursday. After tapping the 50 day EMA (314.88) Monday and again on the Tuesday high, the small caps have been taking on water once more. This is a critical point for the index to hold and make a right shoulder to a potential small reverse head and shoulders base forming along the 200 day SMA. That is possible but something of a pipedream at this juncture.
DJ30
Well, DJ30 finally got some more significant volume, and as with SP500, it was on the downside. The blue chips were hampered by WMT from the open and could barely give the 18 day EMA (10,280) a test before rolling over for a triple digit loss. It has broken through most of the near support and as noted above, there is not much more than air between where it closed and the April low at 10,000.
Stats: -110.77 points (-1.08%) to close at 10189.48
Volume: 249 million shares Thursday versus 215 million shares Wednesday.
The chart: investmenthouse.com^dji.html |
