After Monday's sideways, tight consolidation (an end of day base) that was followed Tuesday morning with the the gap up it appeared that the broader markets were ready to move higher. I did say in the prior letter that this sideways price action may continue until after the Labor Day holiday. After yesterday's disappointing lack of follow through to the opening gap that still seem to be the case.
There were some sectors that were able to hold and move higher, but overall sellers took control of the day and the “Yo-Yo” market continues.
Giving up the gap did not violated the existing uptrend, so just another day of running place for now.
The Gap Up Was Everywhere
All the markets viewed above gapped above their own consolidation; however, only the Russell 2000 (IWM) was about to show some strength. It close above its opening price and the recent resistance to the left. The rest closed below their opens and near the day's low. Doesn't that mean lower? Sure it might, but the trend is up, it get the benefit of the doubt until proven otherwise or a more meaningful event occurs.
What is Holding the Market Back?
Besides it just being end of August (summer doldrums), the Dumb Money are betting that the markets are going higher. They could be right for a change. The trend is up and the market will not drop in any meaningful way. It would really help of these trader would become bearish.
Financials (XLF), Biotech (IBB), Technology (XLK) and Semiconductor (SMH) all gapped higher and fell back to close near the lows of the day. XLF was especially disappointing since it was coming from a longer, tight consolidation. We'll see what today brings. One day does not change the current uptrend.
Homebuilders (XHB) was the best looking sector with a move just above resistance, a close above its open and near the high of the day and an expanding range. Retail (XRT) fell back after the gap up, up closed above the resistance area. Macy's (M) looks like it may move higher. It is holding above a large gap higher from 8/11.
Consumer Discretionary (XLY) gapped up and went nowhere, closing within its sideways range. Industrial (XLI) gapped higher and fell back, but still in it grinding uptrend.
Gold (GLD) and Gold Miners (GDX) continue the correction recently started. GDX is sitting on its 50-MA, but I rather see it pullback to the area of its prior low in the 28.00 area for a turn.
The Energy sector (XLE) and Oil (USO) had a good day, but within the corrective price action after a bullish run higher. We still like this sector and will monitor for new buy setups in it, as well as stocks in the sector and for options trades.
Where Are The Markets This Morning?
Above the chart of the S&P 500, Nasdaq 100 and the DOW futures. They are 30-minute, 24-hour charts that show the pre-market and day-market. If them you can see the erratic intra-day price action. The action get slow and tight, followed by relatively large moves that suggest continuation. But the move fails. Just like yesterday's move higher and resulted in a move back to the lows.
You do not see gaps in these charts since they are 24-hour charts the show all the trading at night and the day.
None were able to clear the old highs yesterday and fell back. This morning there was a earlier break lower that did not follow through (no surprise, right), they moved back up. Now sideways at resistance.
It's not easy if you're trading the broader market. As I've said a few times, it's a stock picker's market. Or just take a week off and rest.
All the best,
Founder of The Pristine Method of Trading