STTG Market Recap March 27, 2014

Stocks continue to lag and we are now back to flat on the S&P 500 for the year as we come close to finishing out the first quarter of 2014.  It is no surprise considering how bullish everyone was entering the year, and how extended the indexes had become late in 2013.  Today the S&P 500 fell 0.19% and the NASDAQ continues to underperform falling 0.54%.   We had our final revision to fourth quarter 2013 GDP with the Commerce Department reporting gross domestic product grew 2.6 percent, better than the 2.4 percent rate projected in February, but just below the 2.7 percent estimated by economists.    On the housing side, the National Association of Realtors reported pending home sales fell for an eighth month in February, with sales down 10.5 percent from a year ago.

Again on the NASDAQ chart, we showed the longer term chart yesterday to help understand why the lower trend line is important – the pattern has been a break of this line for a few sessions (usually 3-5) and then a V shaped bounce right after.  At some point what we will see, which the bears want, is a weak bounce rather than a V shaped bounce, most likely back to the trend line in purple and then the index rolls over.  When that happens, it will be the first time in nearly 18 months we’ve seen the pattern truly change short term.   The S&P 500 also has broken its upper trend line for the first time in about 6 weeks with today’s close.

spx nasdaq

We usually share the NYSE McClellan Oscillator with you but with the extreme weakness in the NASDAQ of late it is worth looking at its sister measure the NASDAQ McClellan Oscillator today – you can see it is at a level of extreme oversold.

namo

Taking a look at sectors we have 2 sectors we’d expect to see money rotating in during “risk off” periods – utilities and consumers staples (we had mentioned utilities as an area of strength last week… and that it usually is not a great sign for risky assets).

xlp

xlu

But we also see one of the more growth oriented sectors holding up: energy.  Now this may be very specific to the turmoil in Ukraine but it is worth noting.

xle

Speaking of housing, we had a high level flag a few weeks back but that has failed, and much like the indexes in general we have seen gains for the year evaporate in this sector.

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