Market Notes and Thoughts…

Markets start the day in positive territory and end on negative ground. Some say profit taking… I say uncertainty still rules the market. Despite all the hype and talk about turning the corner and the markets heading higher… it is still a market without conviction. The first sign of any trouble pushes the traders to take profit and the investors to get nervous. Small caps led the downside move today dropping 1%… and thus the rotation of losers continues. Dow on Tuesday, NASDAQ on Wednesday and the Russell 2000 on Thursday. S&P 500 on Friday? We will see how it works out, but the downside risk remains a challenge for the markets mentally. Technically we have hit against resistance and testing of the upside move is in play. One day at a time remains the theme for now.

S&P 500 index is showing a possible triple top on the chart. The resistance is evident and if this move tests lower and looks at testing the 2040 level again it is not a good sign for the major index. The old trained flea trick comes into play as the market bumps it figurative head against the ceiling of resistance eventually it believes it cannot clear that level. The index is in danger of that very ceiling currently. Technology weakness is part of the reason and banks retreated back from the gains on Wednesday putting more downside pressure on the index near term. 2085 is the level to hold for now.

Semiconductors are dragging the technology sector lower and keeping a lid on the bounce for now. SOXX did manage a bounce off the lows on Wednesday, but still has plenty of work to do before convincing investors to put money to work short term. The first order of business would be a move back above the $91 mark. Then we look at the possibility of putting money at risk if it unfolds.

Crude oil continues to tumble lower with the supply issue keeping the downside pressure on the price. The 1.2% drop today takes the price to $48.60 on the day. Energy stocks remain under pressure and the price of gasoline is creeping back near the $2.50 range.

Transports had moved back above the $148.50 level and were in position to attempt a bottom reversal and follow through… but, the bottom fell out again on Thursday closing at $145.53. Rails and trucks dumped more than 2.3% on the day. Airlines were higher and if they had joined the selling it would have been even worse. KSU, R, UNP lead the downside with only LUV on the upside for the sector. I take this as a big negative on the day.

Treasury bonds (TLT) jumped above the $120.50 mark on the day… that was in follow up to the break above $119 on Wednesday. The rally in bonds serves as a negative for stocks near term as well. Technically the ETF is in position to reverse or break through the trading range off the near term lows. Unexpected in light of the Fed’s promise to hike rates prior to the year end. I am still not a believer near term in the rally and I am watching TBT as the opportunity when the rally ends for the bond. That said, if the fear factor rises and anxiety peaks money will continue to rotate to bonds on fear. That is the other side of this argument for now. Patience as it unfolds.

Earnings are still the tail wagging the dog for now. Amazon beat earnings estimates after-hours and is up 17% on the news. Starbucks beats estimates as well along with AT&T both trading higher also… does that translate into good news for stocks on Friday? All eyes will be watching as we head into the final day of the trading week.