STTG Market Recap Feb 21, 2013

Stocks suffered through a second session of vigorous selling although a buy program that came in exactly at 3 PM lifted stocks well off their lows.  The S&P 500 finished with a 0.63% loss while the NASDAQ dumped 1.04%.  Poor European flash purchasing managers index data set the tone, although some of the selling was just continuing momentum from yesterday's sharp reversal.   The near term will probably get tricky as this two day slide has already built some oversold conditions in but the intermediate term has some challenges unless markets can recover this slippage quickly.

As we look at the S&P 500 you can see the ascending channel the index has been trading in for almost all of the past three months has only been broken for the second time.  The last time it happened was during the political bickering in late December and you can see that was a vicious but temporary event.   So it will remain to be seen if this channel is recaptured quickly - i.e. by the early to middle part of next week.  If not, it would appear a correction of lasting effect is in order.  Volume is a concern as the two selling sessions this week have come on superior volume.

The NASDAQ, after failing at fall 2012 highs already has fallen to spring 2012 highs in just two sessions.  You can see how a month's worth of gains were wiped out in 2 days.

Here is the NYSE McClellan Oscillator - in many ways the index is not showing the tale of the tape as money has rotated into consumer staples such as Altria (MO) and Colgate (CL), while the vast majority of stocks are being hit very hard.

Aside from a substantial drop in oil, we see copper - an important economic indicator - has fallen off a cliff this week.  Also a yellow flag.

Financials, which have been the leaders of this run up, have taken it on the chin this week - one example is Goldman Sachs (GS).  The stocks were quite extended and many have only fallen down to their respective 20 day moving averages but any further breakdown from here will be telling.

Last keep an eye on some of the new leadership stocks - examples are LinkedIn (LNKD), Netflix (NFLX), and Google (GOOG).  These have not given up the ghost - generally if this is the early part of a serious correction, these will be the last to go.  If this is a headfake these will be fine.