This market continues its choppy nature with the Dow falling 200 points, but small caps held up relatively well. Weighing on the S&P 500 today were health care and industrial stocks. Closing lower by nearly 90 basis points the S&P 500 had a difficult time holding onto yesterday’s gains. The NASDAQ followed suit closing down 94 basis points. Volume was up across the board at the close as end-of-the-month volume poured in during the final hour. Small caps were able to hold up relatively well as IWM ended the session with an inside day. The Dow continues to be troublesome as the index notched its 15th day of triple digit moves for the month of March. It appears March’s Lion stayed for the entire month. We continue to see a lack of follow-through on the upside and downside leaving us in a neutral stance. Until we this market can follow-through to either direction we will remain in a neutral stance.
Typically, a market like this prior to 2008 would likely push us into sell mode. The market changed with ZIRP and QE. While ZIRP remains we must remain open to the possibility this market will simply not correct like it has in the past. Just take a look at October of 2014. Normally, we would have seen this market move much lower than 9% on action like that. In order to survive in this world you must learn to adapt to the conditions put forth in the market. “Do business as business is being done.”
Economic data continues to come in on the negative side of things. Chicago Purchasing Managers index came in well below expectations and below 50.0 indicating a contraction. Even the S&P/Case Shiller home price index could not live up to expectations. The divergence between economic data versus the market continues to widen, but what will break?
The dollar has strengthened recently after finding a short-term low last week. After the last Federal Reserve meeting the dollar weakened, but appears to be regaining strength. Given earnings around the corner we will see to what extent a rising dollar has impacted earnings.
Biotech continues to be a slippery slope. Whether it be XBI or IBB the group still looks to be in trouble. There are certainly pockets of strength within the group, but as a whole the group is looking very shaky. Many names have had some serious run-ups and you must be aware of your exits.
Keep in mind your risk management process is paramount. Keep risk in check you will avoid major pitfalls.
