This market is certainly a tale of two tapes. On one hand you have the Dow Jones Industrial Average nearing all-time highs and on the other you have the Russell 2000 unable to hang above its 200 day moving average. Volume was up on the session, bigger on the NASDAQ as it appears institutions were quite active in the market today. The winners are certainly in the big cap, blue chip names while small caps and NASDAQ listed stocks continue to face selling pressure. While the direction of the market is mixed it is clear the Russell 2000 and NASDAQ composite are in downtrends. Odds are in your favor to be long Dow/S&P 500 stocks rather than Russell 2000/NASDAQ listed stocks.
The late day rally was nice to see on the NASDAQ. It helped push the NASDAQ well off its lows defending the 4000 level for the second time in as many weeks. By mid-afternoon it did appear weakness was going to persist and not let up. Earnings continue to pour in and the market will need time to digest the earnings. One thing I have not seen is the financial media pumping “Sell-in-May.” Remember, we are running our special for the month of May. Go to our register page for the coupon codes! In the meantime, we still await a confirmation of a new rally from the Dow and S&P 500. Right now, we lack any upside confirmation.
Even if we can breakout and confirm a rally it still remains a big question market given where the VIX stands. The VIX is so low it simply does not scream the market can have a big run. Anything is possible and we aren’t about to predict where the market will go next. However, if we are to breakout and run hard it usually doesn’t come from a market whose expected volatility is so low. The odds aren’t in our favor for a big run up to the upside here.
Leading the S&P 500 was none other than the Utilities sector followed by financials which have been banged up as of late. Strength continues to find its way into Utility names. Right or wrong who really cares other than the flight-to-safety happens to be in Utility names. Why ignore it?
Volume was big enough to signal a potential trend change in the NASDAQ and Russell 2000. This does not mean we are guaranteed to go higher. It simply means there is a possibility we could move higher. While both of the indexes remain in sell mode we are always vigilant to our process. We aren’t married to either side nor do we want to be. If the trend changes per our process we simply go with it.
We have also started to track some intraday moves in some pump and dump schemes. To take advantage you would need a platinum subscriber and use our “Sell-in-May” deal!
