For the most part today was a pretty decent day of consolidation for the overall market. Early morning gains were quickly erased before the market could really get its feet underneath itself. Selling was not unrelenting as volume was well under Tuesday’s level. Small cap stocks were hit the hardest. We continue to see a market pull in from hitting an uptrend high at the beginning of this month. The NASDAQ composite ran up roughly 500 points in the month of October. It may take some time to consolidate the gains. GOOGL and AMZN continue to dominate the NASDAQ 100. It is clear leadership is narrow as it is focused on a few large cap technology names. To us, it is neither a positive or negative. It simply is. This market continues to consolidate its gains in an orderly fashion and is certainly a positive for this market.
Leadership is considerable thin for a market uptrend. However, for an uptrend that has been running since 2009 it is no surprise the large cap names are the ones who are getting all the attention. Biotech continues to struggle and other small cap technology names continue to play second fiddle to FB, AMZN, NFLX, and GOOGL. Heck, even NKE is holding up the Dow Jones Industrial Average. Not all tech is created equal. AAPL continues to struggle with its 200 day moving average. All the while MSFT continues to sit at all-time highs. Stick with strength.
To show a stark contrast of what is working and what is not. Just look at Macy’s ticker: M. Today it gapped lower and ran lower. A traditional big box retailer and it is failing. WMT is another big box retailer having tremendous difficulties. On the flip side, AMZN who continues to reinvest and innovate continues to eat every retailer’s lunch. AMZN’s only competition seems to be BABA. Both retailers have disrupted the retail business and it clearly shows they are taking it to the likes of WMT and M.
At this point everything should be kept as simple as possible. Do not overthink trades here. While this market remains somewhat overheated we cannot lose sight of possible entries and of course cannot miss our exit signals. Stay the course and win the day.
