Market Recap for Tuesday, April 9, 2019
Profit taking dominated Tuesday's action with the small cap Russell 2000 leading the list of losers, dropping 1.22%. But sellers were most everywhere as the Dow Jones, S&P 500 and NASDAQ fell 0.72%, 0.61% and 0.56%, respectively. Nine of eleven sectors were in negative territory as well, led by industrials (XLI, -1.36%) and energy (XLE, -1.22%). Industrial suppliers ($DJUSDS, -2.61%) were the weakest industry group in the XLI as WW Grainger (GWW, -3.07%) once again failed at overhead price resistance:
Sometimes you can look at a chart and immediately a key level jumps off the chart at you. I believe GWW is one of those charts. It took me a nanosecond to see that 320 has been a wall of resistance. Each time we move to that level, the sellers line up. So it would be technically significant to close above that level, especially if the breakout were to occur on heavier-than-normal volume.
Broadcasting & entertainment ($DJUSBC, +0.72%) and internet ($DJUSNS, +0.22%) helped the communication services sector (XLC, +0.27%) lead on a relative basis yesterday. Walt Disney (DIS, +1.65%) was upgraded and it broke out to a 2019 high, while Facebook (FB, +1.51%) continued to strengthen and did the same:
Both of these stocks now look strong technically and should help to provide the communication services sector with further relative strength ahead.
Pre-Market Action
Crude oil prices ($WTIC) are up approximately 0.50% this morning as upward pressure there continues. Gold ($GOLD) and the 10 year treasury yield ($TNX) are flat in early action.
There wasn't much movement in Asian markets overnight and that same storyline holds true this morning in Europe.
After a couple of choppy sessions on Wall Street, futures are pointing to a slightly higher open today.
Current Outlook
Transports ($TRAN) have been mostly strong off the December 2019 low, but have been unable to clear the early December reaction high. That would be the next big step for transportation stocks technically:
The recent March double bottom could have printed the inverse right shoulder with a downsloping neckline connecting the December and February highs. But I wouldn't be totally comfortable that the Q4 weakness is behind us until we see closes above 11100.
Sector/Industry Watch
While financials (XLF) have lagged badly on a relative basis, there are pockets of relative strength within the industry. The Dow Jones U.S. Specialty Finance Index ($DJUSSP) is one of those pockets, rising more than 30% year-to-date. The group is clearly overbought, but short-term weakness would provide excellent entry into a very strong industry:
20 day EMA tests are generally solid entries during uptrends, so a pullback to test its rising 20 day EMA would be something to consider for the DJUSSP.
Another very strong group in the financial space is the Dow Jones U.S. Financial Administration Index ($DJUSFA), which is up more than 25% in 2019.
Historical Tendencies
Baidu, Inc. (BIDU) broke out recently to 2019 highs after a rough second half of 2018. This renewed technical strength coincides with upcoming seasonal strength as you can see below:
April is arguably BIDU's best month over the past 15 years.
Key Earnings Reports
(actual vs. estimate):
DAL: .96 vs .89
MSM: 1.24 vs 1.26
Key Economic Reports
March CPI released at 8:30am EST: +0.4% (actual) vs. +0.3% (estimate)
March Core CPI released at 8:30am EST: +0.1% (actual) vs. +0.2% (estimate)
FOMC minutes to be released at 2:00pm EST
Happy trading!
Tom
