Sellers push indexes lower and volatility rises

S&P 500 index flirts with support at 1925. The sellers took a slow shot at the downside, but still no signs of excessive worry with the VIX at 12.6. This got mine and almost everyone else s attention as tomorrow is Friday the 13th… seriously the test of the recent move higher as erased those gains and puts traders on watch short term. Longer term positions are still in watch and see mode. 1890 is the level on the S&P that should get the attention of intermediate term investors. Plenty to contemplate and watch… one day at a time.

Retail sales data was not overly impressive as it missed the 0.7% growth with only 0.3%. Autos were positive, but not in line with expectations. The economy is growing, just not at the pace many had expected at this point in time. This could put some pressure on earnings expectations for the second quarter as well. Stock buybacks have been the mode of growth and if it cannot keep pace to make earnings look good… you know how it goes. No time to speculate only time to manage the risk of our positions.

Now we all face the bold headline I saw more than one today, “Is this the start of the selloff?” I am not convinced of that, but the prophets all believe it is coming.

Practice patience.

Notes to Note:

  • The Volatility or VIX index¬†jumped in early trading to 12.6 or up 8.7% today. This is above the level we were watching all week and now puts some pressure on stock prices. How much worry or selling will creep into the markets near term? Anyone’s guess, but we are here to manage risk not worry about it. VXX is the ETF for playing the rise in volatility should this mode continue tomorrow.
  • Oil moved above $106 breaking from the consolidation pattern and pushing the sector higher as stocks broke to new highs in XLE, XOP and IEO. Speculation on geopolitical issues is never a longer term event… watch and raise stops.
  • Energy and Utilities only two sectors to close in the green on Thursday.
  • Consumer Services, Industrials and Basic Materials were leaders on the downside losing 1.2%.
  • Transportation lost 1.9% and erasing the acceleration to the upside. Uptrend line still in play.
  • Airlines were hit the hardest by the rise in oil prices. Which in turn impacted the transportation sector. Airline Index fell 3.3% today.
  • Interest rates on the thirty-year bond fell six basis points to¬†3.41% and the ten-year is at 2.58%. The move keeps the downtrend in yields in play as well as the hope for the bond sector to push off another attempt at rates pushing bond prices lower.
  • Semiconductors (SOX)¬†finally post a red letter day after 15 consecutive up days. Uptrend still fully in play.
  • Small caps (IWM)¬†tested the break higher the last two days, but is holding above the $115 level. Move above $117 would be a continuation of the upside and follow through to the breakout from consolidation above $113.
  • Commodities (DBC)¬†have been the brunt of many a joke lately, but the move in gold and silver is pushing the mining stocks higher and attracting money as it rotates from stocks. GDX up 2.6% and GDXJ gained 5.7% today.
  • Despite weaker than expected retail sales numbers the furniture and furnishings were at highest levels in six years. The sector was lower on the day, but a trend worth watching for impact.
  • Yesterday I stated it was the first day in several weeks to have¬†short ETFs moving into the top performing sectors.¬†That was true again today.¬†If this continues a test lower will be a reality, but two¬†days do not make for a trend.

Chart Notes:

The chart below is a comparison chart of the ten sectors that make up the S&P 500 index and the index itself. The goal of the chart is to see what is leading and what is losing. We posted this yesterday to show the start of the move lower and to look at what developed moving forward. Today the chart is upsdeate and the acceleration lower in some sectors is worthy of note. Consumer, financials, industrials and healthcare are leading the index lower. Energy was the only positive movement on the day in the index. We will keep watching going forward for clear indications in either direction.

SP500Scatter

The gold miners (GDX) have established a bottom off the May lows. They consolidated and then started a methodical move to the upside. The move Wednesday above $23.20 was a positive reversal break and some follow through on the upside could offer a upside trading opportunity. The follow through on Thursday made it even better. The miners are playing catch up with bounce in the price of gold. This move needs to validate on the upside before exposing principle. GDXJ is chart below posting more than a 5% gain on Thursday.

GDXJ

Crude Oil made move above $106 and you can see the break higher in UCO below. Watch for a target of $110 if the Iraq geopolitical issues remain. If they subside sell your positions as this is a speculation move in the price of the commodity.

UCO

The choppy moves the last three days would be considered consolidation currently and we are watching to see how it progresses from here. The May sales report will be out tomorrow and could be the next data point of note moving forward. Take what the market gives and keep pushing forward. Manage your stops to control our downside risk.