The Sell Tone

GSRTrades Weekly Market Report

Market Bias
Seller’s Edge

Where We Are

Mounting evidence for our sell bias tests our patience.

We’ve been bearish for a couple of months as distribution days, where a down day in the market is accompanied by volume exceeding the previous day, has set a tone.

In the last couple of weeks we saw four distribution days on the S&P 500, which indicates institutional players have been unloading some of their massive portfolios to play defense.

In the meantime, price action has drifted sideways on most of the major indexes and sectors. While the churning on higher than average volume is considered bearish, the longer it takes without a sell-off, the lesser the chance of it.

Simply put, if it doesn’t sell it rallies.

A sell-off would put the technical support areas of the 50-day moving average in lay for the major indexes. Most indexes and sectors have now undercut or tested their 20-day moving averages.

Looking into specific sectors, last week we saw the Healthcare Index ($HCX) close below its 40-week exponential moving average, a key gauge for the long-term trend. We have our eye on it as potential leadership in a correction.

The bullish argument is bolstered by a number of successful growth stocks, such as Apple (AAPL), breaking out to new highs. Despite a number of slumping former highfliers, such as Google (GOOG), we can’t discredit the presence of other leaders that still command.

This week’s main event will be the employment report set for release Friday. A real correction likely won’t set in until we see sell-offs on bad and good news. The market has successfully shaken off about everything so far in this bull leg. But remember, it’s not the news that’s as important as it is the market’s reaction to it.

Technically Speaking

MAJOR INDEX BIAS & PERFORMANCE FOR WEEK
BIAS
Index
Chg.
%
Action
+
DJIA
-196 -1.75% Pulls back from high
+
Nasdaq
-69 -2.73% Pulls back from high
+ NDX 100
-55 -2.66% Pulls back from high
+
S&P 500
-31 -2.51% Pulls back from high
+
S&P 100
-12 -2.24% Pulls back from high
+
Russ 2K
-25 -3.41% Pulls back from high
or = Above or Below 40-week exponential moving average. + = 50-day SMA is above the 200-day MA

FOUR-WEEK VOLUME INDICATOR BIAS
Accumulation
Distribution
BIAS
Index
Major
Minor
Major
Minor
DJIA
4 0 4
1
Nasdaq
4 0 2 0
S&P 500
3 0 4 0
Russ. 2K
4 0 4 0
Accumulation: index up with more volume than previous day. Distribution: index down with more volume than previous day. Major: > 60-day average, Minor: <.

SECTOR TREND BIAS & PERFORMANCE FOR WEEK
BIAS Sector % Action
+
U.S. Dollar, $DXC +0.51% Shy of 52-wk high
+
Gold & Silver Miners, $XAU +3.82% Breaks north of major MAs
+
Commodities, $DJAIG -0.99% Consolidates on 50-day MA
+
Consumers, $CMR -2.26% Pulls back from high
+
Cyclicals, $CYC -3.17% Pulls back from high
+
Technology, $DJUSTC -3.30% Pulls back from high
+
Semiconductors, $SOX -6.08% Pulls back from high
+
Software, $GSO -3.39% Pulls back from high
+
Telecoms, $XTC -1.51% Pulls back to 50-day MA
+
Banks, $BKX -3.85% Pulls back from high
+
Broker Dealers, $XBD -3.15% Consolidates above 50-day MA
+
Retail, $RLX -3.93% Pulls back from high
+
Healthcare, $HCX -1.48% Sells off under 50-day MA
+
Biotechnology, $BKX +0.25% Holds at 50-day MA
+
Pharmaceutical, $DRG -1.90% Pulls back to 200-day MA
+
REITs, $DJR -1.30% Pulls back from high
+
Homebuilders, $DJUSHB -1.94% Pulls back from high
+
Transportation, $TRAN -1.69% Pulls back from high
+
Airlines, $XAL -2.74% Holds at 50-day MA
+
Defense, $DFX -1.41% Pulls back from high
+
Energy Index, $IXE -3.46% Pulls back from high
or = Above or Below 40-week exponential moving average. + = 50-day MA is above the 200-day MA

News To Watch This Week

Earnings:

  • MONDAY: Affymax, Inc. (AFFY), Almost Family (AFAM), BioLase Technology (BLTI), Clorox (CLX), Pitney Bowes Inc., (PBI), XTO Energy Inc. (XTO)
  • TUESDAY: Archer Daniels Midland Company (ADM), Baker Hughes Incorporated (BHI), Cephalon, Inc. (CEPH), Dollar Financial Corp. (DLLR), DryShips Inc. (DRYS), Duke Energy Corporation (DUK), FirstEnergy (FE), j2 Global Communications (JCOM), Molson Coors Brewing Company (TAP), Peet’s Coffee & Tea (PEET), Thomson Reuters Corporation (TRI)
  • WEDNESDAY: Boston Beer Company (SAM), Career Education (CECO), Garmin Ltd. (GRMN), Williams Companies Inc. (WMB), Wynn Resorts, Limited (WYNN)
  • THURSDAY: Activision Blizzard, Inc. (ATVI), Bebe Stores (BEBE), Crocs, Inc. (CROX), Kraft Foods (KFT), Public Storage (PSA), Sara Lee (SLE)

  • FRIDAY: Hansen Natural (HANS), UTStarcom (UTSI)

Economic:

  • MONDAY: Personal Income, Personal Spending, Construction Spending, ISM Index, Auto Sales, Truck Sales
  • TUESDAY: Factory Orders, Pending Home Sales
  • WEDNESDAY: ADP Employment Change, ISM Services, Crude Inventories
  • THURSDAY: Continuing Claims, Initial Claims, Productivity-Prel
  • FRIDAY: Employment Report

This Week’s Word On Discipline

“Freedom is not procured by a full enjoyment of what is desired, but by controlling the desire.” –Epictetus

This Market Report is our broad analysis that is the foundation for our Growth Stock Report, which highlights trading opportunities in individual stocks.

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