The market continues to act confused and disoriented. The gap lower on Monday sent plenty of stocks lower at the open, but by mid-morning they were ready to bounce back. The major indexes ended the day with the NASDAQ higher and the S&P 500 and Dow indexes slightly lower. It is important to look at what bounced and if it means anything going forward. Looking at our scatter chart below we see that technology was one of the leaders on the day gaining 0.7% while most sectors struggled to breakeven. This is one sector we need to see take on a leadership role again if the indexes are to maintain the uptrend. On the downside Finanicals have been struggling to hold support. A bounce from that sector would be a positive sign as well for the broad market indexes.
Small Cap stocks were higher on the day as well showing some movement back towards growth. IWM, iShares Russell 200 Index ETF gained 0.5% on the day after starting down 0.5% at the open. A follow through today would be a positive and a move above the $105.50 level would establish a new high as well as renew the uptrend from the sideways consolidation the last three weeks.
Watching the Dow Jones Industrials will key also with the index struggling to maintain the uptrend. The rolling top is testing support at the 15,420 level and break lower would be a negative short term. This is the index many are pointing to as the downside indicator currently. Even if we break the current support the next level is 15,300 and we would need other sectors and indexes to join the downside move to accelerate beyond that level of support. That said, it is one component to watch as we progress through this week of trading.
Overall nothing has changed… still speculation on the downside relative to the usual list of worries, Japan, China, Tapering and the economy. The three week sideways trend is still in play and with the exception of the Dow holding currently at support. None of these worries will change short term and that makes them an excuse to sell. Watch, manage your risk and stay focused on your convictions and let the market determine the direction not the talking heads who want you to read or tune into their advertising model.