Saturday, April 5, 2014

Market Summary: Outside reversal day as Dow gets rejected at Long term resistance once again...

We pointed out this interesting long term pattern in the Dow last year. This week, for the second time, we tested those resistance levels. On Friday, after hitting resistance the Dow (and all other major averages) put in an outside reversal day lower, closing at lows.

This daily chart of the Dow notates this second rejection. I continue to maintain this cautious approach as risk vs reward may or may not be ideal at these price levels. And as we took a look at, continued weakness abroad many of the growth and momentum names. However as we will see in this post, when we take a look at the big picture we still see a bull trend in tact. So although cautious, I don't see any reason for panic.

Looking at the S+P 500 daily chart above, we see the tough day that Friday was. However even with Friday's action, the S+P still put in a positive close on the week and trades positive year to date, still above it's 50 and 200 day moving average.

One index that I don't hear much talk about is the S+P 100. This index holds 100 of the largest stocks by market cap. It's very close to it's 2007 highs now, a potential added confluence for resistance, at least on first touch.

The Nasdaq is under more selling pressure as it's 5.58% below it's highs and negative year to date.

We can see the difference as the percentage of stocks on the New York Stock Exchange trading above their 150 day moving average is 72% (a healthy number).

Whereas the percentage of stocks on the Nasdaq trading above their 150 day moving averages is 55%, still a good number, anything above 50% is pretty healthy.

It was interesting to note that with Friday's ugly day the Volatility index was only up about 4%. It's really hard to get overly bearish with a VIX reading sub 20.

The cumulative advance - decline lines for both the S+P 500 and the New York Stock Exchange continue in solid up trends.

The spread between high yield and treasury bonds have even firmed up a bit,  holding it's 200 day moving average.

Sector performance year to date continues to favor Utilities and Health Care.

Performance by asset class year to date.

Lastly the trend matrix continues it's moderately bullish theme, there were no changes from last week. This is not a market timing tool, but rather a gauge of the direction of the overall trend and the strength thereof. The stocks in the S+P 500 trading 20% or greater below it's 52 week high has ticked down to 6.8%, down from 7.0% last week.

So there you have it, we do have some resistance levels above to keep an eye on. However the underlying trend and internals continues to be supportive.