China trade news has weighed heavily on the stock market averages so far this week, although that is nothing out of the ordinary.
The S&P 500 and DOW traded comfortably above their 50-DMA’s throughout most of Monday’s session, but ultimately ended just slightly below.
Both major indexes reversed off their highs for the day with about two hours to go in the session, then closed near their lows on heavier volume, which is clear stalling action.
Yesterday, the major indexes gapped down at the open, managed to rally until the last hour of the day, but then gave up the ghost and closed at new session lows.
Rotation among the market’s leadership has led to an environment where broken, prior leaders continue to decline and fall by the wayside, as new leading growth stocks shape-up and begin to take their places. This is considered healthy, normal action and to be expected.
Currently, there are constructive bases forming in the retail, medial/biotech, building/related, semiconductor and software groups, among others. Also, the line of least resistance remains to the upside.
So, continue to keep track of the strongest stocks in the strongest groups, with superior fundamentals. Set your alerts and be ready to initiate some long exposure, provided we continue to see healthy, constructive action from here.
Keep in mind, there are times when the general market may put in its lows, but then take weeks, or months before “cooperating.” Hence, be patient and trade what you are seeing, not what you want to see.
The NASDAQ rallied powerfully off of its 200-DMA last Thursday and Friday, although it has continued to find stiff resistance right below its declining moving averages and declining tops line so far this week, which is not constructive.
The Russell 2000’s rally didn’t even come close to reclaiming its declining moving averages, before it ultimately rolled over and continued to sell-off over the last couple days.
The S&P 500 stalled on heavier volume with two hours to go in the session on Monday. It then gapped down and sold off on even heavier volume yesterday, as it continued to pile even more distribution days on to its current cluster.
The DOW stalled on heavier volume with two hours to go in the session on Monday. It then gapped down and sold off on even heavier volume yesterday, as it continued to fall back towards its 200-DMA.