Markets Struggle Again – NASDAQ Leads Downside

How do we evaluate the trading day? More selling that pushed the S&P 500 index to support at the 1840 level and then drifted higher the last hour of trading. The NASDAQ did essentially the same testing a key level of support and then finding buyers willing to step in and add positions. Is that it for the selling? Let’s just watch and see. We can not make any assumptions in either direction at this point. The selling has been prompted by the belief valuations relative to growth are too high. I am not going to disagree with that argument, but it one that has been propagated for the last six months. Fundamentals don’t matter until they matter.

Earnings start this week for Q1 and that will be one key component that challenges investors mindset on fundamentals. Let the fireworks begin.

Moves worthy of NOTES:

The NASDAQ 100 index (QQQ) fell more than 1% on the day and managed a small rally the last hour. Some of the biotech stocks were up 2%+ after starting lower. Tech posted some gains off their respective lows on the day as well. QQQ touched $85 support and moved up slightly. Some positives, but the sellers still have control relative to sentiment for now.

The S&P 500 index (SPY) held above support at 1840. Reviewing the sector Utilities, Consumer Staples and REITs were the leaders. The downside in the other sectors remained with Energy, Financials and Consumer Services leading. There are still plenty of concerns, but the late day reversal gave some hope that the selling is at least slowing.

The VIX index moved above 15 on the day, but that still does not show excessive fear. The NASDAQ VXN managed to move above 2o showing where the primary movement is currently for the market relative to selling. Watching to see if either accelerate. VXX moved to $42.80 resistance off the test of the lows.

ETF Watchlist from Monday:

Russell 2000 (IWM) broke $114 support today down 1.5%. Broke 50 DMA. Support at $112.
Financials (XLF) fell to $21.75 support today down 1.5%. Support 50 DAM or $21.63?
Banks (KBE) held support at $33.26. Down 1.2%. Break 50 DMA and support selling could accelerate.
Consumer Discretionary (XLY) broke 63.53 support and down 1.9%. 200 DMA and $61 next stop?
Transportation (IYT) Reversed upside break and testing the 50 DMA again? Down 1.4%.
Biotechnology (IBB) Started the downside. Up 0.6% on Monday? $124.40 support?
Real Estate (IYR) Defensive money rotation with $68.50 resistance in play.
Gold (GLD) Held $123.40 support. bounced Friday and held up today at the 200 DMA. Big question mark for the sector looking forward.

Go to the Daily Trading Notes for more details of our strategy for the trading day.