Las Matematicas en Triangulos, automatizando un sistema de trabajo -Математика на треугольники, автоматизации рабочего системе - 数学成三角形，自动化的工作系统 - Mathematik in Dreiecke, die Automatisierung ein funktionierendes System - الرياضيات في المثلثات، أتمتة نظام العمل - Mathématiques en triangles, l'automatisation d'un système de travail - Matematica in triangoli, l'automazione di un sistema di lavoro - Matemática em triângulos, automatizando um sistema de trabalho - 三角形に数学は、動作中のシステムを自動化する
Small-caps’ slide reflects a market in trouble,....By Dave Fry
Small-caps’ slide reflects a market in trouble
Opinion: Stock bulls find danger under the Street’s surface
By Dave Fry
Markets rallied early only to see an afternoon swoon as large cap indexes were in record setting position on Thursday.
Many bulls explained the early rally as a delayed reaction to Janet Yellen’s testimony before the senate Wednesday. Frankly the Fed chairwoman said everything and nothing in testimony littered with contradictory happy talk. The early rally was further enhanced by the ECB, which projected interest rate cuts likely in June and put Mario Draghi’s credibility on the line.
But stocks fell later on Thursday as energy, utilities, biotech and small cap sectors led declines. Market valuations are also being challenged as the Nasdaq CompositeCOMP-0.40% is trading at roughly 35 times reported earnings while Biotechnology is at 40 times reported earnings. The Dow DJIA+0.20% managed to eke-out a small gain, but that’s all the average investor sees if they’re paying attention.
But under the surface troubles loom with markets. (See small-cap chart below).
Jobless claims fell about as much as they rose the previous week at 319,000 vs. 330,000 expected and the prior 346,000. There was little market reaction. Closely watched China markets rallied slightly as exports improved primarily due to the cheaper yuan. Indexes there only rose 0.3%.
Earnings news featured a double-digit drop in Tesla Motors TSLA-0.11% and a double-digit gain for Keurig Green Mountain GMCR-0.18% . Earnings news overall have been volatile while earnings beats are common on much lowered estimates.
Most of the news coming out of Ukraine is just the ongoing card game Putin is playing. He says he’ll “withdraw” troops but the Pentagon hasn’t confirmed that. Meanwhile, Ukrainian separatist rebels demand a vote for East Ukraine independence, nixing any peace conference. Putin then says they’re out of his control adding “sadly” the peace proposal is dead. The bottom line there seems unchanged as Putin continues to slow-play his hand keeping the West guessing. Meanwhile, Russia’s war games intensify and China and Russia sign a joint military agreement.
Leading market sectors higher included: Financials XLF+0.05% , Insurance KIE+0.31% , REITs ICF+0.06% , Semiconductors SMH+0.63% , Retail XRT+0.22% , TransportationIYT+0.02% , England EWU+0.42% , Turkey TUR+0.67% , South Korea EWY+0.53% , Taiwan EWT-0.09% , Australia EWA+0.64% , Chile ECH+1.11% and the U.S. dollarUUP+0.05% .
Leading market sectors lower included: small caps IWM-0.06% , Energy XLE-1.43% , Metals and Mining XME-1.09% , Natural Gas Producers FCG-2.94% , UtilitiesXLU+0.16% , Biotech IBB-1.82% , Healthcare XLV-0.54% , Solar TAN-1.90% , MaterialsXLB+0.06% , Bonds TLT+0.36% , Natural Gas UNG+0.04% , Hong Kong EWH-1.34% , Brazil EWZ-0.70% , Mexico EWW+1.18% , India EPI-0.42% , Thailand THD-2.89% , Vietnam VNM-4.23% , Silver SLV+0.33% and the euro FXE-0.49% .
The top 20 market movers by percentage change in volume whether rising or falling is available daily.
iShares Russell 2000 Small Cap ETF IWM-0.06% is displayed on a weekly chart which is now confirming the completion of a bearish head & shoulders pattern already registered on daily charts. This has been “the tell” for many investors for a market correction. This sector’s divergence from big-cap peers (SPDR Dow Jones Industrial Average ETF Trust DIA+0.04% & SPDR S&P 500 ETF Trust SPY-0.13% ) has been impressive and reflects broad market damage under the surface. Chart details include from top to bottom Relative Strength Indicator; Custom MACD Histogram moving average; 5- & 10 period simple Moving Averages; and, Money Flow Index.
Volume was lighter on Thursday and breadth per the WSJ was negative.
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The NYMO is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.
The McClellan Summation Index is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended.
The VIXVIX+0.22% is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.
Small-caps are only one of many sectors taking a dive as Social Media, Internet, Biotech, Alternative Energy and so forth are the weight that is dragging even big-cap issues lower. Defense is the order of the day until prior highs in all sectors are established.
Earnings reporting for the first-quarter is almost over. Next week we’ll be getting more results from retailers. Analysts have been steadily reducing their estimates on that sector as winter has taken a toll.
Putin is slow-playing the situation in Ukraine and no doubt giggling over the West’s ineptitude. This situation is going to stay in the headlines for some time to come.
Economic data Friday is limited to JOLTS report and Wholesale Trade. Let’s not forget the many Fed governors out campaigning for their own views of policies.
Let’s see what happens.
Dave Fry is founder and publisher of ETF Digest and has been writing articles on ETFs since 2001. He is the author of "Create Your own ETF Hedge Fund: A Do-It-Yourself Strategy for Private Wealth Management," (Wiley Finance), and "The Best ETFs: U.S. Equities, A Companion Guide to Building Your ETF Portfolio.”
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