A weak consumer sentiment did not sway buyers as the market saw beaten up transportation and energy stocks led the session. This market was due for a rally as we have been quite oversold and with stocks down 5 days in a row today’s session is not a surprise. Coupled with weak seasonality this market my find itself finding it difficult moving higher. Distribution on the S&P 500 is still high and a one day is not a guarantee of this market moving higher. Regardless of your opinion stick to price signals and managing risk. Stick with the plan.
The positive here we saw QQQ and SPY find support at key moving averages. QQQs found support at its 50 day moving average. SPY found support at 200 day moving average. However, we have seen this story before from this market for much of this year. Another positive is while the distribution count is high for the S&P 500 it is not for the NASDAQ. It is quite clear the NASDAQ is the place to be. It has been outperforming the larger market and is the clear winner. We like winners.
On the flip side we see the Russell 2000 sink briefly below its 200 day moving average and market a new low. The index had been the leading index this year, but has since fallen to the laggard. Never a good sign to see small caps lag this badly. This will need to improve promptly and the set of lower highs and lower lows will need to be broken.
Tomorrow’s Federal Reserve meeting will usher in some volatility. Fireworks are always fun on Federal Reserve Days. It will be interesting to see if the central bank will hold onto its rate hike rhetoric. We do not know how the market will react one way or another, but what we do know is our process will continue to perform well. Execution is key.
More to come tomorrow as we are likely to see some volatility. Cut those losses short.
