Random Thoughts for a Random Market

I want to go on record as saying this is one mixed up market. Like Monday, today starts out to the downside… rallies nicely into positive territory and wanders aimlessly into the close. Now to me that is random market activity. Whatever way the wind is blowing the market finds itself pointing in that direction. No conviction, no trust, no belief and no clarity. With all of that in mind I have some random thoughts on where we stand currently:

  1. The NASDAQ index is at the 5080 ish level and remains below the 2000 highs of 5132. From my view if we are going to continue higher the index needs to take out that level and move higher. If not, the downside check towards support could be the 4812 mark. In conjunction with the downside move 5007 would be the level of support that would offer hope of holding the move to a smaller test. From my view the NASDAQ plays a key role in the future movement of the broad markets. This is a short term (3-9 months) outlook for the index
  2. S&P 500 index is flirting with the 50 day moving average. 2134 is the previous high and level we need to move through similar to the NASDAQ index. The difference being that was a new high for the S&P 500 index. 2080 is near term support and the 2010 mark is the likely destination for any correction or pullback in the index. This is a short term outlook for the index.
  3. In relationship to the S&P 500 index is breaking down the sectors. A look at the pivot point of the latest low (March 26th) as the starting point we find a mess. Below is a chart showing the scatter graphs of the ten sectors of the index bench marked against the index. The results are three leaders… XLK, XLV, XLY, three laggards… XLB, XLF, XLU, and four losers… XLE, XLP, IYZ, XLI. The division among the sectors is indicative of what we have been discussing the last three months… no direction at the sector level which defines the broader index. This is a market stuck in a indecision mode. Chart
  4. The chart of Europe (IEV) shows a similar test to the 50 day moving average as the S&P 500 index. A break lower takes out the trendline off the January lows and disrupts the upside move in the sector. Greece is getting the blame as they continue to banter about repayment of the ECB/IMF loan negotiations. I don’t expect a resolution any time soon and we may well see Greece exit the euro zone. The real test in the country has come from Germany (EWG). They are the economic leader for the euro zone and the break of the trendline off the January lows was broken on the downside last week. This remains a questionable challenge for Europe overall. This is one sector of the world to watch as it unfolds. The domino effect in Europe could rattle the balance of the global markets going forward.
  5. The trend in banks and the financial sector are key from my perspective. Interest rates are rising again with a jump of 16 basis points the last two days. This should help the sector, but it has had minimal effect which shows the lack trust or belief by investors of the sustainability going forward. Many don’t believe the Fed has what it takes to make the tough decisions on rates and the outlook for growth in the US markets. KRE, Regional Banks ETF, bounce back on Tuesday, but has been in trading range with pressure each time it attempts to break higher. Takes patience and a longer term perspective to own the sector and for now that is our focus. I am willing to add to the position if we get the move through the resistance of the previous highs. KBE, Large Banks, is in the same boat on the upside move. $24.50 is the key support for the Financials (XLF).
  6. Treasury bonds (TLT) are under pressure on the rise in interest rates the last few days. How this plays out is up to the Fed as it has been for the last few years. Short treasury bonds is building an argument again after the recent stall. $118.60 is the key support level to watch near term.

As we continue to say patience in the key in this random walk through the markets we are currently experiencing. Take it one day at a time and more importantly take what the market gives.