Once again, we are entering a very split tape as investors sold leaders (tech stocks) and bought laggards for the second straight week. The Nasdaq and Nasdaq 100, which were leading the market for all of 2017, fell last week as the Dow Jones Industrial Average hit a fresh record high. So far, this still remains a relatively shallow pullback. In the short term, the 50 DMA line is the next level of support to watch for the popular averages. In early June, the Nasdaq was up close to 18% year-to-date which is much stronger than the ~8% year-to-date gains the S&P 500 and Dow Jones Industrial average enjoyed this year. After a big run, it is perfectly normal to see the Nasdaq pullback to digest that move. The worrisome part is that it is pulling back on heavy volume which is not ideal. After the 50 DMA line, the next important levels of support to watch are: Russel 2000: 1351, then 1335, then 1308. The Dow Industrials: 20.6K, then 20.4k, S&P 500: 2352, then 2322.25, Nasdaq Composite: 5995, then 5805, then 5769.39. Until those levels are breached on a closing basis, the bulls remain in control on a short, intermediate, and long term time-frame. Keep in mind, if the selling gets worse, a defensive stance is warranted.
Thur & Fri Action:
Stocks fell on Thursday as other global central banks came in a little more hawkish than initially expected. The market is beginning to realize that the era of ultra-easy money from global central banks is winding down, if not over. Once again, tech stocks were under pressure for most of the day. Stocks were quiet on Friday as the market digested a busy week and focused on the big blockbuster deal from Amazon. Amazon said it will buy Whole Foods for $13.7 billion. Shares of Wal-Mart, Kroger, Target, and other competitors fell sharply while shares of Amazon and Whole Foods jumped on the news.
Market Outlook: A More Cautious Tone Sets In
The market is split at best and the key now is to focus the health of this pullback. Will it be another short pullback in both size (small percent decline) and scope (short in duration) or something more severe? As always, keep your losses small and never argue with the tape. Want Adam To Be Your Personal Portfolio Consultant? You Don’t Have To Feel Alone In The Market, There Is A Better Way: Learn More