Light volume Mondays are not an outlier event, but with the price declines Monday was not the way bulls wanted to start the week. QQQs saw higher volume than Friday, as the ETF tracking the NASDAQ 100 stocks closed below its 50 day moving average. SPY on the hand had lower volume and continued to push lower from its 50 day moving average. June is neither a month of big gains or big losses. Seasonality doesn’t favor big moves and this year will not likely be an exception. Volume was lower on the exchanges, but it will be how Tuesday’s market reacts will be interesting to watch. Caution is certainly warranted here with SPY and QQQ below their respective 50 day moving averages.
If you subscribe to cycle theory since April the apparent cycles are pointed lower. So far, the markets have ignored these cycles until just recently. IWM still remains above its 50 day moving average while SPY and QQQ sit below theirs. Small caps certainly have an advantage here over its larger cap ETFs. At this point SPY is weakest and should be treated as such. If we are to rip back through the 50 days for SPY and QQQ it would be a positive sign for this market to push higher.
As far as canaries in the coal mines are concerned I think you could certainly look at HYG and JNK. Both are acting real weak as the fears over a rate hike loom for the bond market. High Yield markets are particularly sensitive to interest rate moves. Another is certainly XLU as utilities are seeing selling pressure as traders and investors fear rate hikes will harm their dividend yields. TLT remains weak ahead of next week’s FOMC meeting. It is highly unlikely rates are moved higher at this meeting. However, rhetoric over whether or not rates will move in September may be increased. Let’s also not forget the IMF has stated it would like the FOMC to hold off on any rate hike until the first half of 2016. At this point it is a guessing game.
Keep on grinding and welcome back from the weekend!
