STOCK MARKET CONTINUES TO RETREAT -- A LOT OF SHORT-TERM SUPPORTS ARE BEING BROKEN -- FALLING APPLE HURTS NASDAQ -- BOND ETFS FALL BELOW 200-DAY AVERAGES -- SO DO UTILITIES
MAJOR STOCK AVERAGES BREAK 50-DAY LINES... Stock selling that started yesterday has spilled over to today as the market's short-term trend continues to weaken. Trading volume over the last week has also taken on a negative pattern, with heavier trading on down days and lighter volume on bounces. In addition, stocks have fallen back below their 50-day averages. Chart 1 shows the Dow Industrials in danger of dropping to the lowest level in a month. Chart 2 shows the S&P 500 already trading at a new four-week low. Technology is one of the day's weakest groups. That weakness can be seen in Chart 3 which shows the PowerShares QQQ Trust falling well below its 50-day line by the widest margin since January. Notice also that daily MACD lines for all three stock indexes have turned decidedly negative. Last Thursday's message suggested that a downturn in that indicator might encourage some May selling. That appears to be the case. Another bad sign for technology, and the market in general, is the drop in Apple. Chart 4 shows that stock (which is the biggest Nasdaq stock) falling below a falling 50-day line as well. Three of the day's biggest Dow losers are technology stocks -- Microsoft (-3.0%), Apple, and Intel.
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Chart 1
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Chart 2
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Chart 3
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Chart 4
BOND PRICES BREAK SUPPORT ... Bond yields continue to surge, which is pushing bond prices sharply lower. Chart 5 shows the Barclays 20+Year iShares (TLT) falling below its March low and 200-day average. Chart 6 shows Investment Grade Corporate Bond iShares (LQD) doing the same. That's keeping downside pressure on rate-sensitive stocks like utilities. Chart 7 shows the Dow Utility Average tumbling below its 200-day average. The collapse in bond prices, and surge in bond yields, is making stock traders nervous. A falling dollar is lending support to oil prices. Material and energy stocks are holding up reasonably well. So are consumer staples. Janet Yellen's comment that bonds and stocks look overvalued may be contributing to the selling in both asset classes.
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Chart 5
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Chart 6
