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Market Breakout Cancelled Or Just Delayed?

  • Written by Syndicated Publisher No Comments Comments
    April 9, 2014

    In Thursday’s post I noted that the S&P 500 had closed at a fractional new high on Wednesday, and Dow Theory followers were looking for the DJ Transportation Avg. and DJ Industrials to break out to new highs together, as a confirmation of an important upside breakout by the overall market.

    It looked promising in the early going yesterday, when the Dow was up 60 points in its initial reaction to the jobs report. But it soon rolled over in a sell-off that closed it down 159 points, actually an ugly downside reversal day.

    So was the ‘breakout’ by the S&P a breakout, or another failure at a short-term triple-top, as occurred from the December top?

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    And did the failure of the Dow Industrials to break out constitute a non-confirmation of the breakout by the Transportation Average, which would be a negative by most Dow Theorist interpretations. Or was its breakout just delayed by a kneejerk jobs report reaction?

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    Was the spike down by the Nasdaq to a three-month low, below its level at the end of last year, a sign that the previous market leader on the upside, is now leading on the downside?

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    For the moment the hoped for break out by the blue chips to new highs has been at least delayed. But all in all, no real damage has been done.

    However, it does illustrate how quickly things can change, and the risk as we near the end of the market’s favorable season this year, and does have us watching our intermediate and longer-term indicators closely.

    There are very few important economic reports scheduled to be released next week, which will leave the market free to contemplate the first quarter earnings reports that will begin trickling in, as well as anticipating GDP growth for the first quarter, which will be reported on April 30.

    Other Voices:

    Patti Domm, CNBC: “After Friday’s momentum meltdown, traders are watching to see if once high-flying Internet, social media and biotech names can stabilize in the week ahead or whether they will ensnare the broader market in a bigger downdraft.”

    James Paulson, Wells Capital Management: “When it broke the upward tilt in the S&P, most of the S&P held together except for tech. My feeling is next week we get some buyers looking at these values that were created by the selloff. . . . . I think it’s going to bring in some buyers next week, and we’re going to focus on the fact that the economic momentum is still here.”

    Joshua Brown, editor The Reformed Broker: “Oh man. Rough week. All the momentum favorites have been hammered, good companies thrown out with bad ones. . . . . names like Facebook, Twitter, LinkedIn and Yelp have been absolutely pummeled. . . . . A fun fact – the biotech sector was up 21% year-to-date in the middle of February and as of yesterday it’s negative on the year. . . . . One thing that will probably not work is to just assume that everything will be back to where it was once the storm passes. Markets don’t work that way. Traders fall out of love with some stocks and become enamored with others; stories and narratives fall apart; Institutional investors become satiated and unwilling to eat any more of a particular cuisine, regardless of fundamentals.”

    Did gold find support at its 30-week m.a.?

    Gold had been rallying off a double-bottom so far this year until extra volatility struck, with an additional spike up in reaction to the Russia/Ukraine war worry, and then a spike down after the war scare went away.

    The short-term downside momentum continued for two more weeks.

    But did gold find support this week at its important 30-week m.a.?

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    To read my weekend newspaper column click here:   The Market’s Annual Seasonality is a Real Concern This Year

    Subscribers to Street Smart Report:

    In addition to the long-term, intermediate-term, and short-term charts and signals in the ‘premium content’ area of this blog, the new issue of the newsletter from Wednesday is inyour secure area of the Street Smart Report website

    Images: Flickr (licence attribution)

    About The Author – Sy Harding, Street Smart Report

    Sy Harding publishes the financial website Street Smart Report Online and a free daily Internet blog at Sy’s Free Blog. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!

    It includes our research and analysis on the economy and markets, and provides charts and buy and sell signals on the major market indexes, sectors, bonds, gold, individual stocks and etf’s, including short-sales and ‘inverse’ etf’s.

    It provides two model portfolios as guides. One is based on ourSeasonal Timing Strategy, one on our Market-Timing Strategy.

    In depth updates are provided every Wednesday, with interim ‘hotline’ updates every time we make a trade. An 8-page traditional newsletter Street Smart Report is provided on the website every 3 weeks, in pdf format for viewing or printing out.

    There is the Street Smart School of online technical analysis ‘seminars’,commentaries to keep you ‘street smart’ about Wall Street, and much more. 

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