Markets Remains Challenged Psychologically

Today’s Notes:¬†

Great start to the day, but Nasdaq closed negative and S&P 500 index barely in the red. Why another day of not being able to hold onto gains? Small Caps fell 1% after being up 0.8% and rattled investors. Biotech was up 1.8% and fell 1.8% on the day. Big intraday swings on the sector that have been the drag of late took the broader index for a ride lower as well. Let’s say this one more time… LACK OF CLARITY leads to LACK OF CONFIDENCE.

Running scans this afternoon shows we now have 11 negative ETFs versus the four from Wednesday. If this continues we could see more of a trend shift overall and we have to be cautious moving forward. The positive scans were 123 versus the 149 on Wednesday. Again, patience wins this race.

Chart to Note:

The Russell 2000 Small Cap index is a challenge for the broader markets and, as you can see on the chart below, the support near 1090 is being challenge. A break opens further downside in the index and more of a challenge for the broader indexes. Watching to see how this unfolds going forward.

RUTX

The NASDAQ Composite index continues to work on the head and shoulders pattern and 3990 support. Wednesday tested lower and we got a lower close today. The challenge for the index are the small caps, biotech and technology sectors (Both lower today again). Growth is moving out of favor and value or safety is moving into favor. Watch to see how this plays out in the short term moving forward.

comp

Notes to Note:

  • Financials started with a nice bounce off the lows this morning, but gave most of it back into the close. Banks remains the drag despite some positive comments on the day. Watch the downside break of support as a short opportunity.
  • Volatility index (VIX)¬†stayed at¬†13.4 and no build in negative sentiment for the broad large cap index. For now it is an area to watch for clues on direction. Even the¬†NASDAQ Volatility index (VXN)¬†was unchanged on a negative reversal intraday at 17.4. No anxiety showing in this data? Be patient is the message form these indexes.
  • XHB – the downgrade on the sector has taken its toll on the sector. Tested a move below $30.60 support today, but closed at $30.71… break opens short trade opportunities.
  • Tesla Motors disappointing data on earnings push stock lower by 11.3%. Attempted to bounce, but failed to hold the move and closed lower following the gap lower open.
  • Energy (XLE) traded down 1.4%¬†as investors locked in some profit. Still in uptrend and has been a key leaders for the broad markets. Watching to see if there is more to this near term.
  • Utilities (XLU) fell 1% on the day as well with some selling pressure back. Worry on yields rising slightly on comments from the ECB on easing on rates in Europe.

Final Note:

The markets remain uncertain in direction. Another day of up and down challenges are keeping the markets in check. Economic data has been improving versus the winter reduced growth in February and March for the US economy, but not anywhere near what some expected on the recovery. That is causing havoc mentally for investors. Until the picture clears it will remain a focus for investors. Stay focused and remember that cash is a sector and sometimes the best trade.