Intraday reversal off the lows puts the indexes in good shape or does it? The data kept the market on the downside to open and then… the buyers stepped in to push the indexes off the lows. Is this another buy on the dip and take the market to new highs? That has been the mode of operation for the indexes and why should now be any different. So what if the economic data doesn’t validate the robust growth the Fed is peddling. One day at a time is all we can do for now and as we are seeing in the EGG scans the results are just as mixed relative to the outcome for leadership.
Technology became a concern last week when the semiconductors started breaking down on weakness in the semiconductors. They started weaker today, but reversed early and spent the day moving back to positive territory. They are still being challenged relative to the technical data, but we have to watch how they respond the balance of the week.
Homebuilders (ITB) were down 5% last week and the pending home sales out today didn’t do the sector any favors and they were down another 1.1% on the news. The support is $27.75 and that is where we closed on the day. Not looking good from my perspective and the weak data. Watch for a bounce and then more selling to follow.
The volatility index (VIX) moved up to 13.6 in early trading, but managed to move lower as the market found support and buyers closing at 12.6 or near the Friday close. VXX is on my watch list as a hedge for any long positions. Be patient and don’t assume anything.
China added to the move higher as the index added 1.8% on the day. This is the EGG position and it continues to play out according to design for now. The country ETFs in the emerging markets are doing well and the outlook is positive, at least for now. Japan (EWJ)moved back near the recent highs and Indonesia (EIDO) did the same.
Base metals (DBB) added to their upside and continues in a solid uptrend with a minor test on Friday volatility in the markets. Copper and steel continue to be the catalyst on the upside for the sector.
There is plenty of noise in the media, the analyst, the daily market moves and just about every other measure. This is a time to practice patience. Buying the dips has been working, but like all good things, the eventually end. Let the move validate, take what the market gives and if the downside gains momentum be willing to step in.