On the surface, it looked like a good day with the Dow Jones industrial average managing a solid day and breadth running around five to three positive. However, if you dig down and look at some of the sector action, it is a mess. On the one hand, housing and things related to it, like Ethan Allen Interiors (ETH) and Home Depot (HD) , looked quite strong. On the other hand, the semiconductor exchange-trade fund, VanEck Vectors Semiconductor (SMH) , broke under its 50-day simple moving average and is back to March levels.
The S&P 500 closed at its lows, and the Nasdaq 100 ETF (QQQ) finished with a loss of 0.6%.
There are a large number of inconsistencies in the market, with value and slower-growth names doing well while most anything technology or biotechnology-related really struggling. Oil and precious metals bounced, but the names held by funds like ARK (ARKK) continued to break down.
Traders were grumpy as the stocks they favor were acting poorly, but the folks in the media seemed to see beyond the stocks that make up the Dow.
The trading would be much easier if there was highly correlated selling and corrective action. That would allow for negative sentiment to build and for bottoming action to eventually develop. Instead, we have this highly uncorrelated action, with many stocks still hitting new highs and others already wallowing in a bear market. Sentiment stays unduly positive, and the business media help to cover up what is really going on out there.
To put it in technical terms, it is a mess and, what is even worse, is that there is no clarity on how this will play out. Do the big caps roll over and drag everything down further? Or do some of the rotational action reverse and cause some of the more pronounced inconsistencies to reverse? No one knows the answer right now, and action, like we had today, only makes it murkier.
My game plan is to simply sit and wait. The one great certainty of the market is that conditions will shift.
Have a good evening. I'll see you tomorrow.