Markets finished well off intraday lows Friday, but if one was to take a look at the weekly picture some dark clouds on the horizon have the potential of trouble. The Nasdaq CLOSED mere handles above its 50 day SMA Friday after trading well underneath during the day, akin to the action it witnessed with its 200 day SMA on Wednesday. It lost .6% yesterday, now on a 7 day losing streak, and for the week has given up 2.7%. If one believes price follows volume like myself, a look on the weekly for the Nasdaq paints a worrisome picture. Distribution weeks were present ending 1/8, 1/15, 2/5 and this week lost 7.3, 3.3, 5.5 and 2.7% respectively. To be fair the largest volume week of ’16 was a bullish one ending 2/12 which LOST .6% but CLOSED right near the top for the weekly range, a bullish sign. That action was the middle of a bullish weekly morning star pattern, but that seems to be forgotten at the moment. The S&P 500 chart (shown below) which has behaved better than the Nasdaq, has its own issues to deal with. Although it recorded a bullish hammer candle Friday its CLOSE of 2065 confirmed the bearish weekly shooting star from the week prior. The doji candle on 4/20 now looks prescient and the two spinning top candles this Tuesday and Wednesday add to the negative narrative. For the week it lost 1.3% and it still in positive territory on a YTD basis higher by 1%, while the Nasdaq continues to lag 4.6% in ’16. We all know markets tend to overshoot both to the up and downside, and the move to 1800 earlier this year was extreme and this current trouble with the round 2100 figure mirrored that just in the opposite direction. Perhaps investors who have been taking money off the table with equity outflows 13 of the past 17 weeks, that many view as a contrarian signal will be rewarded. Looking at sector returns for the week is exactly what bulls did not want to witness with tech surrendering 3% and healthcare falling 2.9%. The best performing group were the defensive utilities as the XLU rose by 2.2% (the only other positive groups were energy and staples up nearly .7%).
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