SUMMARY:
- Techs trying to take over the lead, but no one is following.
- Economic data looks good but markets are not forecasting same.
- Import prices rise more than expected but way down from March. Not importing much inflation.
- Business inventories rise, but sales rise more.
- SP500 makes a lower high as test of April lows is on.
- Techs set up to breakout, SP500 ready to test the low.
A weaker than it looked Friday caps a mixed week.
The techs continued to show relative strength, but as noted Thursday, the way the market turned the last few sessions, showing relative strength is similar to winning an ugly contest. NASDAQ and SOX did post decent gains on rising volume, typically a good indication. It was no sharp stick in the eye, but it was primarily driven by Dell's earnings that frankly were the result of its ability to pirate more of the same-sized pie. Nonetheless it sparked some buying (short covering) in some large cap techs and in the semiconductors, and it was enough to hold NASDAQ in its handle, something the NYSE indices were unable to do.
SP500 and SP600 broke back below the necklines of their head and shoulders bases and the 200 day SMA. That brought in some short covering as is typical when an index undercuts the 200 day. They rebounded from the lows to close, but remained below key resistance levels. While not collapsing, the two have just about given up any vestige of the rebound and follow through off the April lows. Both have suffered three distribution sessions this week as well. They have not broken the April lows, but they are in the process of making a test of that level. That could actually be a positive if the test is successful, but this was an awfully short rebound to be setting any kind of significant bottom. We wanted more time to pass before they fell back as that tends to weed out the market a bit better. At the same time you always have to remain flexible; as we have often said, if you wait for perfection in the market, you are always waiting.
At the same time you have NASDAQ holding up in its handle to the late April double bottom. It is short and that makes it questionable as well, but it is hanging in there. There is a lot of resistance yet to clear and NASDAQ is still in its downtrend, but if it can take its recent strength and break higher it could turn into a leader just as SP500 tests its lows. If that test is successful, then it bounces higher as well, supporting the NASDAQ move. Perhaps. With the recent action that smacks of hope. Hope has about as much place in the market as waiting for absolute perfection. With the indices still in downtrends, unable to react to good news, the Fed still on the hiking warpath, and the NYSE indices undergoing distribution once more, what looked to be doable to start the week is now a tall order. |
