Money Rotates Again to Safety

Today’s Notes:¬†

Selling takes root today as¬†the NASDAQ led the push lower dropping¬†1.3%. Twitter lock-up ends and selling begins, down 17.8% on the day. The short call on Athenahealth (down 13.8%) by David Einhorn. That in turn spilled over to the financials (yesterday’s dog) down 1.4% and consumer services down 1.4% as well. Both pulled the S&P 500 index down 0.9% on the day. When all was said and done, the market shifted back to the previous mode of dump momentum stocks and buy dividend stocks. Thus, we are back to the rotation to value or safety.

Energy was the sole sector to finish positive on Tuesday. The consumer and financials were the biggest losers on the day. The dollar dropped below support on a gap lower to start the day. Overall the other asset classes held steady with all eyes currently on the US markets.

As I have stated for the last several weeks the challenge still lies in confidence factor relative to the growth in the US economy. Plenty to worry about, but some remain optimistic. I still believe we have to be patient and let all this play out moving forward. Patience is best in market cycles like the current one being played out.

Chart to Note:

Banks continue to be a drag on the broad markets and now are in position to break support and move lower. (posted Monday) The chart below is updated for today’s activity and shows the break of support and the next level to watch is¬†$30.75.¬†Short financials with¬†SKF is looking¬†like a better play than owning the sector near term.


Notes to Note:

  • Twitter lock-up on restricted stock was up today and those insiders seemed more than willing to sell their shares. 134.5 million shares were traded on the day versus the 11.3 million average¬†traded. End result new low on the stock and anyone’s guess as to where this finds support. The impact to the NASDAQ index is felt due to the cap size. Watch to see if it settles here or fall further.
  • Volatility index (VIX) rose to 13.8 from yesterday’s close of 13.3 and the S&P 500 index fell nearly 1% on the day. Even the¬†NASDAQ Volatility index (VXN) only rose to 17 from 16.7. No anxiety showing in this data? Low volume selling.
  • Whole Foods (WFM) fell 14% after-hour as they cut there outlook for growth.
  • Homebuilders (XHB) were the recipient of a short call on Monday and that added to the downside today losing 2% and testing key support at the $30.65 mark. Worth watching if this breaks below support and confirms the downtrend. Target would be $28.56.
  • UUP – Dollar fell below support of the $21.25 mark closing at $21.15 on big move lower today. FXE on the other side of that trade broke higher from the short term consolidation.
  • GLD – gold filled the gap higher left on Monday, but still in position to break from the current consolidation. Watching for the move above the $126.50 mark.

Final Note:

The markets are still uncertain on direction. The overhang of Russia/Ukraine is a challenge for the global markets and oil delivery. Without further clarity near term it remains a negative catalyst potential for the markets. Economic data has been improving versus the winter reduced growth in February and March for the US economy. The challenge comes in the continuance of growth at a reasonable level. Until the picture clears it will remain a focus for investors. The added stress of low volume selling on Tuesday only adds to the uncertainty short term. Stay focused and remember that cash is a sector and sometimes the best trade.