Stocks fell on Wednesday to finish with sizeable losses, but they managed to close off their session lows.
The Nasdaq lost 1.5%, while the S&P 500 shed 1% and ended under the 1400 level. The Dow Jones industrial average dropped 0.9%. This will end NASDAQ’s 7 week winning streak.
The day’s news largely was on the negative side. The Institute for Supply Management’s service sector index fell 1.3 points in March to 56, indicating the sector continues to expand, but it was below forecasts. Payroll services provider ADP said private companies added 209,000 jobs last month, below expectations. And there were lingering worries over the latest Fed minutes, which came out Tuesday and indicated policymakers are not planning for additional economic stimulus measures. Finally Spanish bond sale reminded that the PIIGS are still lurking around.
Now the question is – Whether SPX will break the 3 month trend line? This breach of support will be indicative of changing sentiment. And finally our good old 50 DMA will come into prominence. But these things do happen after such a run up. In fact we might see some more profit taking tomorrow based on the long weekend ahead, specially to ward off surprises by Euro and Friday’s job data.
Now if you look around most of the leaders hung in today with minor correction on low volume to average volume. The leaders of this bull market seem healthy and in control. Some such as PCLN bucked the trend today. On equity side SNDK lost 7% after company cut its revenue forecast and trimmed it’s margin.
Portfolio Time –
The only company to be beaten up today was ALLT. It has been up more than 55% YTD, but 8 out of 11 analyst, who follow this name, maintain buy recommendation on it with average price target of $25. SXCI and URI almost gave back their yesterday’s gains.
Declining crude is taking its toll on WLL, CLR and APA, though continental is clinging to the 50 DMA.
The earning’s change in latest quarter mentioned above is not correct. It seems that Telechart lags the fundamental data update by a month or so. I recently trimmed FFIV, sold all ALXN. I might close CLR and URI of the 50 DMA is broken comprehensively. I plan on taking some profit off ALLT and LNKD. The idea behind taking profit is to have enough cash in hand to a scoop new buys or make additional buys when stocks bounce of the 50 DMA, such as CRUS below.
Lastly during such times, when market is going sideways, keep an eye on Leaders. They will break before market craters. Thus acting as precursor to the impending correction. The leaders of this market are ULTA, SCSS, AAPL, PCLN, CMG, ISRG, TPX, STX, FFIV, EMC, VMW, RAX, etc.
Some good reads –
- Employment up 209K (ADP)
- ECB holds steady (MW)
- Fed signals no need for more easing (BL)
- Gold continues post-FOMC minutes fall (BL)
- Copper falls as dollar rises (REU)
- Brent slips toward $124 on Saudi supply (REU)
- Sagging orders suggest eurozone in recession (FP)
- Eurozone retail sales disappoint (REU)
- German factory orders disappoint (BL)
- Spanish yields reach 12-week high (BL)