EARLY RALLY FADES AS STOCKS SUFFER DOWNSIDE REVERSAL DAY -- THE DOW AND S&P 500 CLOSE BELOW MOVING AVERAGE LINES -- THE NASDAQ FOLLOWS TECHNOLOGY STOCKS LOWER -- ENERGY SHARES FOLLOWED CRUDE OIL HIGHER -- UTILITIES RALLIED WITH BONDS AS YIELDS DROPPED
DOWNSIDE REVERSAL DAY ENDS RALLY ATTEMPT ... This morning's market rebound didn't last for long. By day's end the market had suffered a downside reversal day. And some support levels were broken. Chart 1 shows the Dow Industrials falling 165 points (-.68%) and ending the day below their 200-day moving average. The rest of market fared even worse. Chart 2 shows the S&P 500 falling 23 points (-0.86%). It ended the day below its 50-day average. The Nasdaq fell even more. Chart 3 shows the Nasdaq 100 (QQQ) losing -1.26%. And it did so on rising volume. The QQQ is now within striking distance of its 50-day average. A -2.4% drop in semiconductors helped make technology the day's biggest loser (-1.3%). The morning rebound in industrial and materials (that I showed in my morning message) also ended with losses. Nine out of eleven sectors lost ground today. The only winners were energy and utilities. Energy shares followed crude oil higher. Utilities followed bond prices higher as the 10-Year Treasury yield fell 5 basis points to 2.82% which is the lowest level in a month. A 52-week high in the dollar didn't help the Russell 2000 Small Cap Index which lost -1.6%. The rising dollar may have contributed to another drop in Chinese and emerging market stocks which is keeping pressure on global markets. Today's failed rally attempt shows that stocks are still on the defensive. This week marks the end of the month, the quarter, and the first half of 2018. Some end-of-quarter book-squaring may be adding to the market's volatility. This week's negative chart action suggests that money managers are ending the quarter in a more cautious mood.
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Chart 1
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Chart 2
