Earlier this week I posted thoughts on the S&P 500 index and what a break below the 2075 level could mean… unfortunately it was slightly worse than projected. As we close out the week the index is attempting to hold on to the 2035 support level which means a 40 point tumble and three percent decline for the week. The test below the support above has been enough to rattle investors and trigger stops on trading positions. As we conclude the week and look towards next week here are some issues on our plate that matter…
Chart
Volatility index (VIX) is first on my list with a move above 19 on Friday gives rise to concern that the sellers are engaged and the downside could gain momentum. VXX cleared the 20.60 level of resistance and tested on Friday. If… that is a big word, the index declines back below this level the buyers may step back into the markets and keep the uptrend in play. However, if they accelerates, the downside risk to the markets elevates and it is likely short to intermediate stops will be hit. Fear and anxiety lead to poor decision making short term and the selling would increase.
Crude oil prices have continued to fall adding to anxiety in the VIX. Falling two percent more on Friday the commodity lost 8.5 percent for the week. The move below $42.52 was a big negative and the follow through has only added to the speculation. $38 is the next level of support to watch from August, but for now investors are dumping oil on the rise in supply. The stocks in the energy sector have been shed as well losing 4.8 percent. Oversold is an understatement for the move and it could create a bounce opportunity similar to the last one in October. Tracking to see how it unfolds.
Semiconductors (SOXX) has been a leader up and down. The doji candle close to the end week lends to a directional change if the momentum shifts with it next week. The break below the $88.60 level was a negative, but we have to see if the downside will follow through. This is another sector to watch as the week unfolds.
Financials (XLF) was another sector that tumbled on the worries about the Fed hiking interest rates. Tested $23.85 support and bounced, but some damage has been done to the broad sector as well as banks leading the downside on speculation. A rate hike favors the sector… go figure relative to the selling this week. KRE and KBE both struggled, but the uptrends are still in play… watching for the resulting opportunity.
Retail (XRT) sold lower on worries about the sales data and poor earnings guidance. The holiday season is looking like Grinch may show up this year. The sector fell 2.7 percent on Friday and down 7.3 percent for the week. Volume spiked to almost double normal levels the last three trading day. October data showed just a 0.1% rise in sales versus the 0.4% expected. More negatives for an already negative tone for the week.
NASDAQ 100 index (QQQ) broke support at the $112 level and lost 3.4 percent for the week. It could fill the gap left to the $109 level before a bounce. The large caps stocks were the leader off the September lows and now the question is will they hold the gains? Some key stocks leading the downside like WYNN, STX, SWKS, WDC, BBBY, TSLA and PCLN. This indes is key player for any upside continuation… watching how it unfolds to start next week.
Of the ten sectors in the S&P 500 index only utilities closed in the green for the week. The downside leadership came from energy, telecom and technology. Sellers attempting to gain control of the short term trend and that will weigh on the weekend thoughts. Monday will be key for the indexes and how investor sentiment plays out. We will see. Look for the detailed research notes for the week on Sunday… enjoy your weekend.