Sellers opened the week with the upper hand sending stocks lower. Consumer Discretionary stocks were the worst performing S&P sector with the group down nearly 3%. Volume was tracking higher across the board as the market is searching for a floor. No sector was spared in the S&P 500 as even defensive sectors like Utilities were lower. AMZN and NFLX were both down more than 5% respectively. The second quarter of 2018 did not kick off as bulls planned. We are in an ominous position with this market as the Dow is below February lows and the other major indexes are approaching their respective lows. Will this market action lead to the next bear market? Is the Bull market from 2009 coming to an end? Our best course of action is not trying to answer these questions, but to maintain strict adherence to our risk management process and let this market run its course. This market is in muddy waters and until they clear up it is best to operate cautiously.
Monday was not the way you want to start a quarter. We are holding key moving averages with the exception of the S&P 500. The Dow, NASDAQ, and Russell 2000 are holding their 200-day moving averages and even received a tiny bit of support. Monday’s session lows as well as February’s lows are key pivot points we will watch as this market proceeds forward. It wouldn’t surprise us if sellers completely take over and we somehow find ourselves in a bear market. While it wouldn’t be unprecedented it would help clear the decks and perhaps set up a market where stocks on an end-of-day basis explode higher. Patience will most definitely pay off here.
At this point in time we are going to take things slow and see how this market unfolds. Nothing will surprise us. If we roll over and crash it would not be surprising at all. Most are likely in this camp where they are looking for this market to roll over. There is a possibility this market reverses in heavy volume and hit new highs heading into the next expected rate hike in June. There are no guarantees here, but we must have an open mind. Stay the course and remain patient.
Have a great week!
