Greetings Shark Investors:
It was a somewhat positive, albeit choppy, day for the major indices on Thursday as the intense selling pressures over the previous two-and-a-half days finally eased. Although the recent weakness, mixed action in overseas markets, quiet news wires and a slight dip in crude prices ahead of the opening bell created ideal conditions for a relief bounce, stocks started the day just above the unchanged mark. As the morning developed, some initial dip buying in materials and energy fizzled out, while two of the hardest hit sectors so far this week, tech and financials, saw their bounces stick.
From the New York lunch hour on, each of the major S&P sectors as well as the averages settled into relatively tight trading ranges for the rest of the session, save the more defensive groups: utilities, healthcare and staples. Meanwhile, even though agricultural stocks did well on the day, there was some heavy selling in metals, mining and oils, with particular weakness in dry bulk shippers and solars. The implication is that the speculative activity that had been the hallmark of the rally off of March lows might be starting to really dry up, and instead of buying up stocks that ostensibly should have become cheap over the past few days, investors put their money into classic defensive areas.
All in all, it was a day of rest for the major indices, which, on average, gained 0.37% on breadth that was only slightly positive and volume that was very light. In addition, it is likely that we’re going to have to wait until next week for any sort of insight as to where we might be headed. The market is closed on Monday, and days ahead of three-day weekends tend to be thin and generally positive.
Be that as it may, it’s awfully hard to ignore the technical damage that was done so far this week, and even though the market has a little room to the upside, the fact remains that we are still in the midst of a primary downtrend. While the sell-off earlier this week may very well be long-forgotten if buyers can provide support and turn this in to another higher low for the averages, individual investors would be best served by ratcheting up their defenses as this action plays out.
Let’s go to the charts.
The Nasdaq popped higher during today’s trade on light volume. Technically, the index still remains vulnerable to further downside, and we have raised our caution levels.
The S&P 500 inched higher during Thursday’s trade on light volume. Support levels are holding for now, but the bulls need to show up soon or we may roll back over.
The Russell 2000 moved higher during today’s trade as it looked to stabilize from the poor action yesterday. Though the action on the surface looked respectable, many of the thinner issues saw pressure today. We continue to trade from a more cautious stance until the bulls show some life.