MARKET GAUGE: Confirmed Uptrend
SECTORS EXHIBITING RECENT STRENGTH: Computer (Data Storage), Computer Software (Security), Computer (Technical Services), Computer Software (Data Base), Computer Software (Enterprise), Telecom (Fiber Optics), Internet (Network Solutions), Commercial Services (Staffing), Medical (Products), Medical (Outpatient Homecare), Medical (Hospitals), Transports (Airlines), Financial (Regional Banks).
SECTOR EXHIBITING RECENT WEAKNESS: Medical (Generic Drugs) Medical (Ethical Drugs), Retail (Discount/Variety), Retail (Major Discount), Apparel (Clothing Manufacturers), Building (Heavy Construction), Mining (Metals/Ores), Oil/Gas (Drilling), Oil/Gas (Refining/Marketing) , Transportation (Logistics), Chemicals (Basic).
OVERVIEW: Fridays “Quadruple Witching” options expiration of stock index futures, stock index options, stock options and single stock futures led to increased volume across the indices, but not much in the way of price change. The S&P 500 and Nasdaq finished only fractionally higher while the small cap Russell 2000 led all gainers with a 0.56% advance. The Nasdaq 100 was the laggard closing off by 0.30%. After another week of trading not much has changed in the way of leadership. The Nasdaq Composite continues to show the most strength, along with the small caps, while the S&P 500 lags behind strapped with six distribution days over the last 18 sessions. History shows us, even as recently as 2017, markets can advance when straddled with a series of distribution days like we see with the S&P however, not all markets, bull or bear, are created equal. While the bull market of 2017 created a wide variety of trading vehicles for bulls, this years market, so far, appears to be more of a “stock pickers” market where traders will have to navigate more carefully and be much more nimble while looking for solid opportunities. Many traders can acquire a “paycheck mentality” during easy bull markets where they expect to constantly ring the register collecting easy profits from trade to trade. This type of reinforcement becomes a large obstacle for traders when market conditions naturally and eventually become more volatile. This is why it is imperative to routinely look at the behavior of the major indices as well as the current individual stock leaders to see what kind of footing the market is currently on. Is there wide spread distribution occurring across the markets? Are there very particular areas of strength or weakness? Are there signs of a possible sector rotation in the works? Is the current market environment lending itself to being more aggressive or less aggressive? Predicting the market is a foolish endeavor, but the knowledge gained by studying and monitoring the markets health can give you a tremendous edge over the competition and be invaluable to your bottom line. For now, despite the recent distribution in the S&P, we leave our Market Gauge in a confirmed uptrend, but we continue to preceding with a degree of caution. With that let’s take a more detailed look at where we stand with the four major indices we track heading into next week.
NASDAQ- The Nasdaq Composite continues to be the index leader. The index marked an intraday all time high on Tuesday before reversing and closing near the lows of the day on increased trade. This technically bearish outside day may not necessarily be an ominous sign but it may be something that keeps the index at bay for a while longer, it remains to be seen. The index reclaimed its 50 day EMA on the 2/14 follow through day that confirmed a new rally that was initiated on 2/9. The index did come back to successfully test that line on 3/2 which yielded a bounce that ultimately led to the 3/13 intra day high. In the process, due to the big rally last week, the index lost two distribution days leaving it with three such days now in the current count. Remember, five distribution days within a 20 day period, or seven days within a 25 day period should raise caution flags for traders, so the current outlook in this regard is positive for the Nasdaq. Although the index looks solid in many regards, confirmed rallies are not always guarantees to new long term trends, so we will continue, as always, to monitor the action closely. In particular, we will be looking for any pullbacks to be contained at the 50 day EMA.
SPY- While the Nasdaq, Nasdaq 100 and Russell 2000 have either marked or threatened all-time high territory during the most recent rally, the S&P 500 has been far weaker being rebuked on 3/12 and 3/13 at the 78.6% retracement level. The SPY ETF that we use to track the S&P has traded lower for………… For the rest of this article plus everything our premium members receive including, real time stock trading alerts, watch lists, sector reviews and more head over to http://www.ttptrading.com and sign up for only $69 per month where you get access to both myself as well as Greg Krupinski of GK Trading. See you there!