HIGHER BOND YIELDS WEIGH ON STOCK PRICES -- CONSUMER CYCLICALS AND TECHNOLOGY CONTINUE TO LEAD THE MARKET LOWER -- THE QQQ FALLS BELOW ITS 50-DAY AVERAGE -- WHILE THE SOXX BREAKS ITS 200-DAY LINE
A LOT OF MOVING AVERAGE LINES ARE BEING BROKEN... Stocks continue the retreat that began after bond yields reached multiyear highs at midweek. Bond yields are hitting new highs again today. As was the case yesterday, consumer cyclicals and technology are the two worst sector performers. Chart 1 shows the Consumer Discretionary SPDR (XLY) falling further below its 50-day average. Chart 2 shows the Technology Sector (XLK) trading below its 50-day line today. Semiconductors continue to lead techs lower. Yesterday's message showed the PHLX Semiconductor iShares (SOXX) headed down for a test of its 200-day average. Chart 3 shows the SOXX falling below that long-term support line today. As was the case yesterday, the Nasdaq continues to lead the stock retreat. Chart 4 shows the QQQ falling below its 50-day average today.
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Chart 1
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Chart 2
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Chart 3
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Chart 4
RUSSELL 2000 TESTS ITS 200-DAY AVERAGE... Tuesday's message showed the Russell 2000 Small Cap Index being the first of the major market indexes to fall below its 50-day line, and warned that the selloff in small cap stocks might be a warning that the stock uptrend is losing momentum. Small caps continue to lead large cap stocks lower. Chart 5 shows the RUT falling today to its lowest level in four months and sitting right on its 200-day average. That's an important test for small cap stocks, and possibly for the rest of the market. Small caps have a history of leading stocks lower during market pullbacks and corrections.
