In the first significant day of trading in over a week, bears came out of hiding after profit warnings left traders wondering just how upbeat earnings will be this quarter and provided an excuse to take some profits. Warnings out of Home Depot (HD) and DR Horton (DHI) along with Standard & Poors cutting ratings on 12 billion of subprime mortgage bonds got the market off on the wrong foot, but it wasn’t until the end of Bernanke’s speech that the selling really accelerated. Bernanke usuallly has a way of providing some pop to the market, but this time around didn’t say much of anything to alleviate concerns. The robust consumer is showing signs of wavering recently with Walmart’s recent poor results and the warning out of Sears today. As I’ve said before this will be a critical area to watch so keep an eye on the retail numbers due out this Friday.
Technically, today’s action was obviously bearish but not disastrous. Volume levels indicated distribution, but considering the market was pushing higher with diminishing volume, some significant selling shouldn’t be too much of a surprise. While the S&P just barely took out support of the 50 day moving average it remains firmly in a supportive channel. Both the Nasdaq and Dow still have support of their 50 day moving averages. The selling today sets up further deterioration but it would take another few days of intense selling to cause significant technical damage to the indices. It still pays to be quite cautious up here until we begin to get into the bulk of earnings season which kicks off next week. Stay tuned, it should be a wild ride over the next few weeks!
::: Major Indices Performance – The Numbers :::
(Note: volume averages are based on the average over the past 50 days)
Data as of 4:00EST – End of Day July 10th 2007
Distribution across all indices.
Nasdaq: DOWN 1.16% today with volume 11% ABOVE average
Nasdaq ETF (QQQQ) DOWN .84%, volume 12% BELOW average
Dow: DOWN 1.09%, with volume 20% ABOVE the average
Dow ETF (DIA): DOWN 1.07%, volume 9% BELOW the average
S&P ETF (SPY): DOWN 1.36%, volume 36% ABOVe the average
Russell Small Cap ETF (IWM): DOWN 2.95%, volume 30% ABOVE the average
::: SelflInvestors Leading Stocks :::
The Self Investors Leading Stocks Index is comprised of stocks in the Breakout Tracker, which is a database of the fastest growing companies near a breakout or having already broken out of a base. Leading stocks performed about in line with the rest of the market today.
Summary:
* Decliners led Advancers 324 to 61
* Advancers were up an average of 1.67% today, with volume 37% ABOVE average
* Decliners were down an average of 1.86% with volume 4% BELOW average
* The total SI Leading Stocks Index was DOWN 1.3% today with volume 2% ABOVE average
::: Where’s the Money Flowing :::
Many investing websites provide leading industries based on price performance alone. However, without accompanying volume levels, this can sometimes be misleading. The only way that I know of to gauge industry/sector strength WITH volume levels is through the analysis of ETF’s. A couple years ago this was not possible, but as more traders/investors use ETF’s they become a much better tool for gauging the health of the market and seeing where the money is flowing (or not flowing). Using the proprietary SelfInvestors Demand Indicator score which measures price and volume movements, I’m able to quickly see which sectors/industries are seeing the greatest inflows of cash. For a detailed look at how I go about gauging sector/industry strength please see the following post: http://selfinvestors.com/si/industry_tracking/
* Current Leading Sectors/Industries (over last 30 trading days):
Clean Energy, Technology, Semis, Aerospace/Defense
* Current Lagging Sectors/Industries (over last 30 trading days):
Bonds, Biotech, Home Construction, Banks, Financial
* Today’s Market Moving Industries/Sectors (UP with volume):
Agriculture
* Today’s Market Moving Industries/Sectors (DOWN with volume):
Home Construction, Broker Dealers, Retail, Telecom, Financial
::: Stocks :::
The stocks section will be an area where I highlight one stock selected from a group of stocks moving up with volume well above average and most likely breaking out of a base or consolidation.
It’s been a long day and I’m short on time tonight so no Stock of the Day for today but you might like to have a look at these high quality companies moving with volume today – Perficient (PRFT), Allis Chalmers (ALY) and Visual Sciences (VSCN).
Disclaimer: I own a small position in Visual Sciences (VSCN)