AUTOS AND HOMEBUILDERS LEAD MARKET DOWN -- FEBRUARY LOWS LIKELY TO BE BROKEN
AUTOS SELL OFF ON HEAVY VOLUME... It seems like anything related to autos got sold heavily today. General Motors was the biggest drag on the Dow. Chart 1 shows GM tumbling toward its October low on a big pickup in trading activity. That's not good. Chart 2 shows a similar picture for Ford. The bigget percentage loser in the S&P 500 was Delphi Automotive Systems, which is shown in Chart 3. The heavy selling in DPH puts its October low in jeopardy. Homebuilders did even worse than the autos.
Chart 1
Chart 2
Chart 3
HOMEBUILDERS CRUMBLE... Our Market Message last Thursday, February 27 charted several homebuilding stocks and warned that the group was starting to deteriorate. That subtle deterioration turned into a rout today. Two homebuilding stocks (Centex and PHM) were among the top five percentage losers in the S&P 500. The three homebuilders plotted below suffered the most obvious chart damage. All three have broken moving average support lines -- on very heavy volume. [If you haven't already seen them, take a look at the weak "on balance volume" lines in the Feb. 27 update]. Lennar is the closest to its October low. But it looks like all three are heading in that direction.
Chart 4
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DOW BEAR PENNANT THREATENS FEBRUARY LOW... The Dow was the biggest percentage loser today among the major stock indexes. Today's downside action leaves little doubt that the sideways pattern of the past three weeks is just a consolidation pattern within an ongoing downtrend. The hourly chart of the Dow shows a bearish "pennant" formation. That pattern (which resembles a small symmetrical triangle) shows two converging trendlines. The lower line was broken today. That suggests that the February low will probably be broken. In related markets, Crude oil jumped $1.00 today, which hurt the market. A weak dollar also hurt stocks, but prompted a $4.00 jump in the gold prices (causing gold stocks to bounce). Bond prices also gained ground as stocks sold off.
Chart 7
