So Much for the Market Selling Off…

As I stated last night, one day of selling doesn’t make a trend! Nor does it break the existing uptrend in play. The bounce back today has the headlines buzzing about the bounce and less worry about the dollar, Europe and the Fed. Just when those fingers were slipping off the wall of worry investors got a burst of energy and push stocks back to where they ended Friday. In the case of the NASDAQ it closed higher with the large caps leading the way on the upside. Semiconductors were the leading sector pushing the index to new highs on the day. Conclusion… buyers still willing to step in and buy the dip.

The following are some moves of note:

  • The Volatility Index (VIX) fell back near the 13 mark after a spike back towards the 15 level on Tuesday. The lack of clarity only disturb investors and traders for the day. Evidently Europe is fine, the stronger dollar is cool and the Fed… well they are the Fed lost and aimless as always. The drop is volatility puts the comfort level back at cozy and the worries on the back burner again… after all that is where they belong.
  • S&P 500 index and the Dow Jones Industrial index both created an inside day technically. This leaves the direction open for debate as the buyers were not as convincing as the sellers on Tuesday. A follow through on the upside would create a trade opportunity as well as a break lower would show support for the sellers and the downside move.
  • NASDAQ 100 index managed to recover from the selling and closed at a new high. This puts the index in the drivers seat on the upside and one to watch for the leadership to exert itself further in coming days.
  • Semiconductors (SOXX) were the reason for the breakout move in the NASDAQ above as the sector gained 3.7% and set the pace on the upside. It also pushed technology (XLK) to a new high on the day. In the research update I noted the lack of participation by the semiconductors in the selling on Tuesday as a positive sign for the sector and the index. A positive it was and the move pushed through the resistance barriers and hit a new high for sector. Digging into the sector to find the leadership is prudent as this unfolds.
  • Telecom (IYZ) was on the verge of breaking below support at $29.70 support and bounced 1.2% to hold that level. The upside move is the bigger question to be addressed. Clear $30.25 worth watching and trading the bounce.
  • Healthcare (XLV), Financials (XLF), and Consumer Discretionary (XLY) all recaptured their slide from Tuesday and renewed the positives in each sector. This move puts everything back to where we started the week… looking for a break through resistance and a continuation of the upside short term.
  • Transports (IYT), Crude oil (OIL), Gold (GLD) and Treasury bonds (TLT) stalled their respective challenges that put the worries back in the market on Tuesday… at least for today. Each still has plenty of work left to be done and we will watch how they unfold going forward.
  • Europe (IEV) and the EAFE index (EFA) bounce back in conjunction with the US markets to hold their respective uptrend. Emerging Markets (EEM) sold lower before bouncing back off the intraday low. The dollar still causing challenges for commodities and the emerging markets.
  • Dollar index (DXY) jumped higher against the basket of currencies and continues to show solid strength short term. Oil, gold, soft commodities and emerging markets are responding negative for now and worth watching as this unfolds going forward.

As Tuesday was one day of selling, today amounts to one day of buying in response… how do we determine the winner in the race of the trend? One day at a time… nothing has changed, the worries are still in place, the economy is still stagnant, the global issues are still the same and the news is rattling the investors cage day-by-day. The trend is higher that is one thing we know for certain and until it breaks the bias is on the upside… as was stated in the morning research notes. We added positions in the pattern trading model and we will post more in the other models in the AM… See you then.