STTG Market Recap Mar 25, 2015 – Stock Trading To Go

A very interesting day in the markets as the S&P 500 fell 1.46% and the NASDAQ 2.37%.  Biotechs were crushed today – we’ve been saying the higher they go the more risk they get as they have been on a mostly interrupted run for 4+ years.   That said you just never know when they will correct and even if it’s a bubble you ride a bubble until it clearly ends.  We are not saying it is ending – just pointing out the risk factors.  Today was one of those days people who have been in biotech stocks with almost “no risk” felt some pain.  Also of worry is the effect of dollar on earnings season that starts back up in April – a lot of multinational companies have massive exports and we’ve already seen companies such as Nike mention the dour effect of the higher dollar.  So there could be negative surprises ahead.

Per Reuters:

Earnings are expected to be down 3.1% for the S&P 500, the first decline since 2009. Earnings are expected to be hit by the stronger dollar’s impact on foreign sales. Falling oil prices are also expected to take a bite out of energy company earnings.

The dollar is also hitting some economic data as February’s durable goods orders posted a decline, rather than the modest expected increase, under pressure from the strong dollar and weak global demand. Bookings for goods meant to last at least three years declined 1.4% after a 2% gain in January that was smaller than previously estimated.  Analysts had expected a 0.2% gain.  So bad news was actual bad news today rather than good news because it keeps the Fed in its emergency stance.

Yesterday I wrote that this was a break of our upper trendline in the S&P 500 – the last 5 times that happened we had an immediate pullback.  I stated I didn’t think it would happen this 6th time since it was too close to the 5th time.  I was wrong – quite remarkable how this pattern has repeated!  A week ago Wednesday Yellen spiked the entire market but those gains are now all gone – and some.  So that is an interesting situation; this type of volatility does not really mark a solid market.  Here are the long term charts of the NASDAQ and S&P 500; a week ago we though NASDAQ 4800 could be in play but Yellen sidetracked that idea.  Now we’ll see if it truly is in play.

The NYSE McClellan Oscillator is now back in red so some caution is back in order – coinciding with the bad price action today.

Some key sectors really were hit hard – outside of biotech we also saw the semiconductors crushed.  They are generally a key economic tell.  Here is the ETF (SMH) for the group. The Philadelphia Stock Exchange Semiconductor Index dropped 4.6%, the most since October.

We mentioned transports not following the market strength a few recaps ago – that is usually a negative.  Today they broke a key support line.

Oil actually made a very nice move today – maybe it is ready to really rally?  This is one of only a very few days over the 50 day moving average in a year.

Here are some charts via Marketsmith:

Here is a biotech ETF – we usually use IBB but XBI is another one.  Note the big volume; 2 of the past 4 days have been excessive selloffs on big volume.  Friday was the sort of action that usually marks a short term top with a parabolic move up and then a big reversal.

Here are 2 names in this space that took huge hits – Esperion (ESPR) was just in the news with its cholesterol drug – you don’t want to see huge gains evaporate like this; that’s bad action.

Bluebird (BLUE) had been a traders favorite with a huge move the past year – it took a big hit today too.

In the semiconductor space you see the damage in a name like Lam Research (LRCX).

One area in the energy space doing well are the refining stocks – leader Valero Energy (VLO) is at highs.

Here is a chart of recent 2% drops for the NASDAQ and what happens next per Bespoke Premium blog:

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STTG Market Recap Mar 25, 2015 – Stock Trading To Go