Over the past year, the Dow Jones U.S. Internet Index ($DJUSNS) has risen 23% while the only industry group to outperform the DJUSNS has been the Dow Jones U.S. Toys Index ($DJUSTY), which has risen 31%. Last week's selling to open 2016 was strong enough to cause technical breakdowns in both of these outperforming industry groups, a bearish overall sign for the market for sure. While we may still see strong earnings reports surfacing over the next few weeks, market action is suggesting that many companies are likely to reduce guidance in the quarter(s) ahead. As a result, we're seeing breakdown after breakdown among key sectors and groups. Check out both DJUSNS and DJUSTY on the chart below:
When your two best industry groups are either breaking down or on the verge, it doesn't bode well for future market action as most stocks will be on sell signals on their next bounce.
Happy trading!
Tom
