We had a pretty good reversal today which made outside days on the S&P 500 and Nasdaq. Both of those indices made marginal new highs intraday and had volume increases today. So that qualifies them for key reversal day status. As usual though, we need to get some follow-through selling for this to be nothing but another blip in the multi-month rally.
As usual, I don't think there was one thing responsible for the selloff this afternoon. I think there was a technical aspect to it thanks to the indices failing to hold the marginal new highs they made around 10:30. I was already leery of that early push to new highs because Goldman Sachs (GS) was showing weakness as well as the 2:00 Beige Book release. We got a little selling when that data hit the wires but things stabilized until an analyst note about Wells Fargo brought out more selling. (Did the GS action telegraph the later WFC analyst note? )
Whatever the reason(s) for the selling, I think there's good reason to get cautious here. I haven't liked the way many stocks, which had good numbers, have reacted to their earnings reports. Goldman, which is regarded as the cream of the crop of banks has been weak ever since its earnings:
The other day I thought Intel (INTC) was set to recover from its post-earnings slide but it has continued to slide and is now back in its old trading range.
TXN has had a disappointing post-earnings reaction.
Ditto for AA.
Add IBM to the club.
So there's nothing really terrible in any of those charts. They just tell me that those stocks (and the broader market) got a little ahead of themselves. We're starting to see some cracks in the indices now too. They had been able to mask those slides that individual stocks have had but that changed today. It's most evident in the small caps. Note that the Russell 2000 was not able to take out its September highs like the other indices have done.
The S&P 500 and Nasdaq are now in danger of slipping back under their September highs...
Downgrades to all of the short-term trends today:
| Trend | Nasdaq | S&P 500 | Russell 2000 |
|---|---|---|---|
| Long-Term | 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
*** I'm simply using the indices' relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.
Mike, a note of thanks for distilling the turmoil and helping out everyone, but especially inexperienced traders like myself. I look forward to all of your updates but don't usually post - just wanted to let you know.
Cheers,
Dave
What's the Short term trend on the Nasdaq? You show it changed to down - from up - on 10/21/09. Does it need to go below its 10 SMA? Thanks.
Great review. I particularly like the chronicling of poor post-earnings performance of some important/big-cap stocks.
Oh yeah - you will probably be adding CAT to the growing list of important post-earnings (chart) failures...
Thanks Dave.
Elvis, the Nasdaq is almost 3 points below its 10 SMA.
Duru, yeah, CAT looks like it wants to join the club!
Semiconductors ugly too having long since popped out of their rising channel
http://blog.fallondpicks.com/2009/10/stock-market-commentary-late-day.html
DJF
As usual though, we need to get some follow-through selling for this to be nothing but another blip in the multi-month rally.
Good call. Looks like today wasn't the follow through day the Bears expected. Good earnings in the "key" businesses and Oil seem to be driving this market onward (along with a gazillion Fed dollars).
Large ranging indecisive choppiness is a pretty good indicator of plateaus, tops and bottoms (or has been in the past).
Shorting this market over-night is death.
Mike, I see a possibility for the market to pull back to at least the early Oct level. The intraday chart for the DJIA, SP500, DJT is showing signs of a pull back already. I have posted some of these charts on my blog:
http://lastchipstanding.blogspot.com/2009/10/something-in-air.html
DJF, I didn't like the way INTC, TXN and other tech stocks fail to hold their post earnings report high also. That’s why I'm a bit leery about the strengths in the tech sector.
Mike,
Have you noticed these large swing days lately? I haven't seen this in a few months. Any idea what this might indicate?
Exec