The Call of the Void

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Hey everybody, Dave Bartosiak here filling in for my fellow Marquette alum Jim “The G” Giaquinto.

After a week-long rally was extended further yesterday, the bulls sort of ran out of steam. At the end of the day, stocks found themselves right around breakeven for the session but it was mostly due to a strong open being sold off. Stocks did find some support near yesterday’s session lows which should be encouraging for investors.

Tomorrow, the 50-day moving average for the S&P 500 sits just 13 handles off today’s close at 2,885.70. The Dow Jones Industrial Average finished the day lower by 14.2 points or 5 bps at 26,048.5. The NASDAQ Composite gave up just six-tenths of a point or 1 bps at 7,822.57.

Chart of the Day

NASDAQ Composite

In my opinion, the two most important moving averages to watch are the 50-day and 200-day. Put these on your charts and you’ll notice the interaction many stocks and indices have with these levels. Here I’ve plotted the two on the NASDAQ Composite Index. This recent run for the market started south of the 200-day on June 3rd. The move stalled out a bit today with the NASDAQ Composite closing below the 50-day after opening north of that level.

It appears that the gap up from Friday’s close to Monday’s open is attracting price action on the NASDAQ. The bottom of that gap sits up at 7,767 even. That’s only about 70 bps shy of today’s close. Couple this fact with the S&P 500’s proximity to the 50-day and I suspect an intraday, or even overnight, move lower to test that support before the market gets back on its high horse.

Today’s Portfolio Highlights

Stocks Under $ 10: Looking to bring the portfolio back up to 13 names, Brian Bolan made the addition of AXT Inc (AXTI). AXTI is a stock coming off highs near $ 6 following an earnings beat, down to the $ 4 handle. With a Zacks Rank #2 (Buy), Brian hopes AXTI can help the portfolio gain more exposure to an increasingly attractive chip industry.

Surprise Trader: While the fun part of earnings season is in the rearview mirror, that doesn’t mean that the hits don’t keep coming. This week, Lululemon (LULU) will be reporting, giving a quick turnaround idea for Surprise Trader. Lots of traditional brick-and-mortar retailers have been suffering this earnings season but those with momentum have continued to stay strong.

Short List: The portfolio added a couple of names today. China Lodging (HTHT) along with the very well-known US airplane manufacturer Boeing (BA).

Conclusion

Not the greatest day with the major market indexes coming under pressure throughout the session. That’s to be expected after the furious upside move we saw over the last week. I’d much rather see the market chop around north of the 200-day and below the 50-day than the other way around. I expect this gap gets filled then we tick higher in anticipation of the Fed’s move next week.

 

Have a great night,

 

Dave

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