The S&P eked out a 0.2% gain Tuesday while the Nasdaq dropped 0.5%. Bulls were unable to build on yesterday's rally, most of which came over the weekend. Although we are significantly higher than Friday's close, the intraday action has been extremely lackluster, suggesting that there is more downside to come from here.
It was a risk-off environment today, with tech stocks lagging and blue-chips like Coca-Cola (KO) (+2.3%) and Home Depot (HD) (+5.3%) led the Dow. The banks continue to act very weak, with Bank of America (BAC) (-3.24%) the weakest stock in the Dow. The troubled bank, despite bullish cases made by Warren Buffet and others over the past six months, broke 52-week lows today.
European bond yields continue to climb as officials scramble for a solution. For the market to be surging in the face of alarming auctions in Italy would suggest the expectation of some intervention in Europe and/or from the US Federal reserve.
TECHNICAL TAKE
The general public is probably going to be reading headlines over night like: strong two-day rally in the stock market! All is well after blockbuster start to Christmas shopping season.
If you talk to professional traders, they will tell you a different version of the action. We have had two gap ups with no follow through to start this week couple with feeble volume and a ton faulty technical patterns. There are a ton of divergences that recently have forecast down-moves in the market, such as extreme weakness in the financials.
Every sector has a ton of overhead resistance and the trade is very random, rather than calculated. Markets stalled right around the 50 day moving averages (resistance #2 that we outlined in today's Morning Call).
The retail sector ETF (RTH) has shown relative strength after strong Black Friday sales, which is a general seasonal trend. Refiners (OIH) trade essentially on par with the S&P. Some banks (XLF) held recent low but are a major concern. Tech (QQQ) was weaker today and drag. Many former market leading tech stocks have broken patterns.
Markets still have a lot to prove for anyone to take risk.Seems like most big market participants have checked out for the year. If you have to be here and trade, make sure you know your time frame and don’t get sloppy.
*DISCLOSURES: Scott Redler is short SPY
