MARKET LOSES ENERGY -- GOLDMAN SACHS PULLS BROKERS DOWN -- NASDAQ 100 BOUNCING OFF 200-DAY AVERAGE
OIL SERVICE ETF LEADS ENERGY COMPLEX LOWER... Up until this week, Energy was one of the last remaining market sectors to buck the downtrend in the rest of the market. Not anymore. The Energy sector was the day's weakest group. The biggest loser in the oil patch was in Oil Services, which fell 3%. That relative weakness was reflected in the Oil Svc Holders, which were the day's weakest ETF. Chart 1 shows the ETF falling to a seven-week low on heavy volume -- after breaking its 50-day moving average. Two of the biggest losers in the S&P 500 today were in the oil service group. One of them -- Baker Hughes -- is shown falling in Chart 2. Part of the selling was due to drops in crude oil and natural gas. That was also part of general profit-taking in commodity markets resulting from a strong jump in the dollar against the Euro. The European central bank hinted this morning that it might be ready to lower interest rates. That pushed gold down $2.60 and gold stocks 2%. Selling was also seen in other commodity related stocks like Alcoa and Phelps Dodge.
Chart 1
Chart 2
GOLDMAN SACHS LEADS BROKERS LOWER... Last Friday I showed the AMEX Broker/Dealer Index breaking chart support at its February low. I commented that the brokerage decline was coming in the face of strong earnings. Just yesterday Goldman Sachs reported a huge increase in earnings that were the talk of the TV media all day. Today, however, the big brokerage stock tumbled almost 3 points in heavy trading to help make the financial sector the biggest loser after energy. The weekly bars in Chart 4 show that GS has now broken an up trendline that started last March. The next potential support is the 200-day average near 94.
Chart 3
Chart 4
OVERSOLD SEMICONDUCTORS BOUNCE OFF 200-DAY LINE... Some of the money coming out of former leaders -- like energy and financials -- appears to be finding its way into semiconductors which have been one of the market's weakest groups this year. From a technical standpoint, this is a logical time to expect some bottom-fishing in the key technology group. Right on cue, semiconductor ETFs led a bounce in technology. Chart 5 shows the Semiconductor iShares bouncing off their 200-day average today. The daily stochastics are trying to turn up from oversold territory under 20. The relative strength line, which has been dropping since mid-January, is trying to break its two-month down trendline. The bounce in the SOX gave a modest boost to the Nasdaq market at a critical chart point.
Chart 5
NASDAQ 100 BOUNCING OFF 200-DAY LINE... The SOX bounce helped save the day for the Nasdaq 100 QQQs which are in the process of testing long-term support at the 200-day moving average and the December low at 34. The Nasdaq Composite is testing similar support near 1900. A minor rotation today saw money coming out of energy and financials and moving back into the technology sector. It's too soon to tell if today's rotation was a short-term move or something more lasting. Any combination of buying in technology, and selling in energy, could be supportive for the general market. Bear in mind, however, that money moving into one group is coming out of another. That explains today's relative weakness in the blue chip averages, all of which lost ground today. While Nasdaq breadth was only slightly negative, big board declines outpaced advances by close to two-to-one. Upside-downside volume was positive for the Nasdaq, but decidedly negative on the big board.
Chart 6
