Weekly Technical Commentary by Art Huprich - Friday Morning 02/27
Following a swing by the DJIA from up 132 points yesterday morning to down 97 points in the final 40 minutes of trading, as I posted many charts yesterday all I could think was “up in the morning down in the afternoon is not good tape action!” Especially disappointing is that there has been zero follow through from Tuesday’s 236 point “Dow Wow” and an almost immediate return to Monday’s low of 7105 – NOT GOOD. While the DJIA fell 89 points yesterday, if it wasn’t for IBM ($88.97) (up $3.07) and JPM ($23.05) (up $1.32), the DJIA would have been lower by an additional 35 points. On the NYSE volume contracted to 1.48 billion shares. There were only 258 net declining issues, a good reading. New 52-week lows also contracted to 171.
The NASDAQ, down 34 points, underperformed the other stock market indices. It was pointed out to me that NASDAQs relative strength line, versus the SPX, looks to have rolled over. When I viewed it, I would agree. This puts the technology universe in a more defensive position. I’d be hedging these positions in a fashion that is consistent with your objectives and tolerance for risk.
Speaking of risk, bludgeoned by a four percent loss from both the Drug Index (DRG/234.47) and Biotechnology Index (BTK/620.34), the exchange traded fund that is used as a proxy for the Health Care sector (XLV/23.94) broke below its mid-January low and violated a short-term bullish support line. As a result, it has completed a short-term top. I’d be hedging these positions in a fashion that is consistent with your objectives and tolerance for risk.
Conclusion
Since today is the end of the week and the month, where the market closes will be much more significant, in my opinion. Following is a chart of the SPX. It is updated versus the same one I showed last week.
In light of where the multi-decade up trend line resides, if it is consistent with your tolerance for risk, I would be using a close on a weekly basis under 741 by the SPX, as a stop loss point.
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