More fears over in Europe crept into the market during the early morning going. The market was able to tread water throughout the day, but volume was moving to the upside and with authority. Institutional players stepped up a bit today and showed their true hand, net sellers. While the FOMC meeting minutes provided 20 or so minutes of buying it did not last long. Sellers were in control the remainder of the afternoon closing stocks down near session lows. Institutions provided the volume jumped double digits across the board. For the second straight day the NASDAQ and S&P 500 notched distribution days a signal of caution for the market.
The two biggest losers on the day were financial stocks and semiconductors. BAC stock notched a new 52 week low a signal of weakness, real weakness. Financial stocks continue to be weak and point to further price destruction. It is unfortunate, but the reality. Semiconductors on the other hand did find support over the recent rally. However, the SMH ETF plunged below its 200 day moving average with nearly twice its 50 day average volume. Big players, institutions were moving out of semiconductors and continued their assault on financial stocks. These two industries are not the two industries you want to see breaking down with the market trying to consolidate its recent gains. While it may end up being consolidation, financial and semiconductor stocks aren’t looking that way.
At this very point in time it does appear to be the market could be consolidating recent gains The NASDAQ remains above its 50 day moving average a key level for the index. The same can not be said for its partner the S&P 500. Unfortunately, the S&P 500 could not hang onto to its 50 day and is now looking a change in trend may be upon us. Our recent rally was down on volume not inspiring and inspiring is above average volume. The lack of volume was disappointing, but then again from a historical/seasonal perspective did not tell a new bull run was upon us. Perhaps this market could turn around, but for now caution is warranted and protecting capital is a wise move.
Merely discussing a third round of easing by the FOMC helped boost commodity prices. There is a strong correlation between money printing and asset prices. The only downfall is when the “poor” get squeezed by rising food costs due to rising commodity costs. Unfortunately, the rise in asset prices help out those who are asset owners and hurt those who do not. Regardless, gold and silver even agriculture commodities looked poised to move higher in the short term.
Concluding we continue to be in a difficult tape with the wrong industries showing weakness if we are to see a new bull run. Stay prudent and nimble in this environment and avoid being chopped up.