Stock market pulls back as small caps and Momo slide
The S&P 500 index sold (-0.68%) for the second day, but it remains with a strongly bullish intermediate posture according to the Market Forecast technical indicator.
Likewise, the NASDAQ Composite (-0.92%) and the Dow Jones Industrial Average (-0.75%) both sold off but continue to have their bullish postures.
The Russell 2000 Index (-1.96%) sold strongly and is becoming increasingly of concern as it works the right side of a head-and-shoulders pattern. The Russell 2000 is now in a weak bearish intermediate stance and is trading below its falling 30-day moving average. It’s also worth noting that the Russell 2000 has a “3 red arrows” signal and its price closed below its 10-week moving average for the first time since October.
Momentum stocks replaced low volatility stocks at the bottom of the Factor Selector rankings.
More than 50% of dividend aristocrats closed higher today, while only 30% of NASDAQ 100 stocks closed higher. Dividend growth strategies have outperformed dividend yields and high beta strategies as the market appears to be falling back on quality stocks.
The yield on 10-year US Treasuries ended lower at 1.56%; For the first time in more than 6 months, 10-year rates are now trading below a falling 30-day moving average.
The US dollar rose slightly, which helped US stocks outperform foreign stocks; we have also seen oil prices fall. Gold prices have risen and we have seen some interesting strength in the yellow metal at a time when Bitcoin has returned much of the recent gains.
There was a decidedly defensive tone in the sectors today, with healthcare, commodities, utilities and real estate all closing higher. Energy was the weakest sector on Tuesday.
Our trading application example included selling a bearish buy spread on the Russell 2000 ETF (IWM) due to the aforementioned head-and-shoulders pattern as well as bearish posture.
Get market insights, stock trading ideas and educational instructions at Market Specialists Website.
Stock Market Outlook Video – News, Analysis & Outlook
The author may have positions in the titles mentioned at the time of publication. All opinions expressed here are solely those of the author and in no way represent the views or opinions of any other person or entity.