We missed an interesting session yesterday with our quarterly survey so it is worth mentioning it today. The market was very volatile yesterday but sometimes that can cause a shakeout of sorts when it comes at the end of a correction. Also the NASDAQ hit a key moving average - the 200 day - which if nothing else is usually a place for momentum to reverse in the near term. Was that the end of the correction? Of course we never know until after the fact but creating a new low and then surging off it can sometimes signal a key reversal. As for today, the Federal Reserve continues to try to massage the market's nerves and Janet Yellen helped lift spirits, pushing the S&P500 up 1.05% and the NASDAQ 1.29%.
With the 1st Quarter of 2014 now behind us, it is time to take a break from our daily market recaps to conduct our next StockTradingToGo (STTG) Reader Satisfaction Survey.
Indexes bounced back from oversold levels but until proven otherwise this is just the natural ebb and flow of a downturn. The S&P 500 gained 0.82% and the NASDAQ continues to lag, gaining 0.57%. There was a key retail sales report which lifted spirits but truthfully generally when a market gets too extreme short term one way or the other any excuse to move in the other direction for a short period of time will do.
The selloff continued Friday as we hit short term oversold levels. The S&P 500 fell 0.95% and the NASDAQ 1.34%. For the week, the S&P 500 fell 2.6% and the Nasdaq lost 3.1%, the biggest weekly decline for both indexes since June 2012. The market ignored a U.S. consumer sentiment reading that was a nine month high, with the Thomson Reuters/University of Michigan's preliminary April read on confidence coming in at 82.6 versus 80.0 in March.
While many in the financial media were cheering yesterday's gains, we told readers last week that there had been a major trend change, specifically in the NASDAQ and the recent volatility just meant random movement day to day. In fact our quote yesterday was:
We are seeing an increase in day to day volatility and random movement based on headlines so it remains a time to be cautious until we settle into a new pattern.
Hopefully this cautious stance since last week has helped you look at the market at a different light which is certainly difficult to do when all it seems to do nowadays is go up or sideways. There will be down periods eventually no matter what the Federal Reserve wants or does, and that is a time to raise cash and reduce your risk exposure. This is one of those times. Today the S&P 500 sunk 2.09% and the NASDAQ cratered 3.10%. This was the worst day for the NASDAQ since late 2011. Now with this type of drop we will eventually see some sharp rally, perhaps for 2-3 days, and perhaps as early as next week but until a new pattern emerges it won't mean it's a time to go guns blazing back into the market.