April 17, 2018
By Geoff Bysshe
Today’s analysis is by Geoff Bysshe. Mish will return Monday April 23rd.
Today, the VXX continued to slide, but unlike yesterday, this translated into the major indexes all joining Grandpa IWM in bullish phase territory.
So we finally got the ‘pop’ over the multi-week consolidation area that I’ve been looking for, but…
The Modern Family is still sulking!
One day over the 50 DMA is an ‘unconfirmed’ phase change, so it’s just the first step, but the QQQ and SPY did close well into bull phase territory.
In fact, it should be ha happy first step, but there is still a stubborn attitude in the Modern Family, which is a little disappointing.
This may even be cause for concern.
All but one of the sectors in our Sector Summary table were up today with the laggard being the Financials.
The financials are a story for another day. For now, we just need to make sure they don’t sink too far below last Friday’s low.
Plus, if tech and other groups can demonstrate good leadership, then the rotation from financials into tech and other areas could be healthy.
At first glance, the sector summary table may appear to have demonstrated this rotation into tech since XLY and XLK were the two biggest movers.
However, AMZN, NFLX, APPL, GOOGL, and MSFT all had very strong moves today.
Why is might this be concerning?
AMZN and NFLX account for over 25% of the XLY!
AAPL, MSFT, and GOOGL (+GOOG) account for over 35% of the XLK! If you consider FB which had a good day too, then you’re accounting for 40% of the XLK.
This means that handful of stocks had a big influence on how well the market looked today.
The influence gets even narrower if you consider that NFLX’s earnings excitement lit a fire under AMZN and GOOGL as they provide cloud services for NFLX.
This is not cause for alarm, just concern.
Yes, this small group of stocks always has this potential to influence the markets. So, it’s noteworthy when they have unusually strong days.
And at the same time, it’s important to pay attention to how the rest of the market is doing.
The concern is that a more generally bullish market would have had more excitement in the other members of the Modern Family. Even if we ignore KRE, all the other members seem to be sulking.
XRT won’t move. IBB is still under its 200-DMA, SMH looks like it’s being dragged higher, and IYT hardly moved.
Here’s the optimistic side…
Maybe the Modern Family just hasn’t gotten over the first quarter’s volatility.
Fortunately, IWM has, so maybe there’s hope (I think so).
If IBB, XRT, and SMH could share the enthusiasm of IWM, then the bull market will be back in full force.
Until then we’ll have to keep a close eye on which sectors are really behind the markets moves.
S&P 500 (SPY) Filled its gap from 3/22 and moves to unconfirmed bull phase. Next big resistance at 275. Expect support at 268 - 270.
Russell 2000 (IWM) Good close over key level of 156. Now look for support at 155.50-156 then at Friday’s low and 152.
Dow (DIA) Unconfirmed bullish phase, but IBM down on earnings may weigh on it Wednesday. Key support around 245, support at 241.40 and 235.
Nasdaq (QQQ) Finally well into bull phase territory. Next big resistance area 169.50-170. The 50-DMA is 163.87 is now initial support, then 161 then 160 and 159.25. Then 153 is the big low level.
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