The bears finally got one in the win column. This was another of those days like we had back in early March where every industry index was down. I see a lot of headlines which are placing the blame for today's selling on the April retail sales number. It's tough for me to buy (no pun) that given that retail was one of the better performing sectors on the day. But hey, I guess something has to be the headline. If I had to guess at the reason(s) for today's drop I'd pick one or more of the following:
- It was just overdue "profit taking" in an overbought market
- It was a delayed reaction to the Fed / Bears were just waiting for the Fed to get out of the way to go to work
- The trade deficit numbers which were released this morning
- Interest rate hikes in Europe
- Retail sales
- See #1
The beauty of trading off of techincals is that I don't need to know the reason(s). All I need to know is that sellers stepped up today and did a bit of technical damage. All the indices were down more that 1%. True to recent for, the larger cap indices were stronger than the smaller cap ones -- the Russell 2,000 was down almost 2% while the S&P 100 was down 1.4% and the Dow was down just 1.1%. As you'll see in the trend table below I've switched all the short-term trends to down due to the indices breaking their 10-day moving averages. That's actually been a good buy signal for the last two months so it'll be interesting to see if that is still the case or if the market's changing character a bit.
The Nasdaq is approaching what appears to be decent support around 2,525. I imagine that bulls will try hard to defend that area. If it breaks things could get interesting...
There was a bit of technical damage done to the S&P 500 chart today. It broke 1,500 and its March trendline on increasing volume. It's also very close to a stochastic sell signal.
The Russell gave a stochastic sell signal today and stopped a hair above its March trendline. My guess is that the trendline won't hold and that it'll try to bounce off of its 50-day moving average which is only about 10 points away.
Thanks to all the 10 DMA breaks all of the short term trends are now down at the same time for the first time in well over a month.
| Trend | Nasdaq | S&P 500 | Russell 2000 |
| Primary | Up | Up | Up |
| Intermediate | Up | Up | Up |
| Short-term | Down(-) | Down(-) | Down(-) |
(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
Good point on the "reasons" for the selling. I am also guilty of assuming the dour mood came from the retail numbers! One other small thing of note is that I think the last few days we have seen selling in the morning only to be followed by buying to "save" the market. We gapped down today yet again - how many times can we expect the buyers to step in and rescue things in the same way, right? Sellers finally won one...
Nice post, Michael. Thanks.
On Wednesday, I noted that NYSE TICK has printed 61 occurrences above +1000 tick on the 30 minute 20 days TICK chart. Though I noted that this represented a very strong market, I also noted it shown also an extremely overbought one. Buying at the ask so relentlessly will have to exhaust buying eventually.
Of course, an overbought market that is as strong as this one could keep getting overbought longer than shorts can stay solvent. But I went with the overbought interpretation, coupled with a small OBV positive divergence in QID, and, therefore, bought a nice bunch of QID as a swing trade late Wednesday.
Duru, I totally agree. Easy to say after the fact but I did go short the Qs this morning based on the assumption that the bulls just *couldn't* pull it off 3 times in a row
great point about TICK Michelle.