Was Anything Up on Monday?

Aug 25, 2008: 9:05 PM CST

Monday brought a thrashing in the US Stock Market, but the selling was not contained there. Gold took a hit, oil prices rose very slightly, and bond prices rose on the day, reflecting a possible ‘flight to quality.’  Let’s take a look at some of the sector action on Monday to see if we can figure out what happened and why.

Below is the Sector performance as reported by StockCharts.com:

Today was the same ole’ story, in terms of the Financial Sector (XLF, down 3.5%) and Consumer Discretionary (XLY, including retail, which declined almost 3% today) leading the charge to the downside as investors pulled money out of these shaky sectors, which had been mounting a respectable recovery since the July bottom.

Some financial stocks (small banks particularly) had rebounded as much as 100% (doubling in price) in roughly a month, yet others have rebounded sharply and now retraced a large percentage of those gains.

This action represents a good lesson in what lead yesterday can lag today, or what looked strong yesterday can return to underperform today.  Also, it can be a lesson in the relative danger in ‘bottom fishing’ or ‘knife catching’ possibly.

Nevertheless, the broader indexes still remain divided, in terms of the S&P 500 and Dow Jones having broken down beneath a rising wedge (or rising trend channel), while the Russell 2000 and NASDAQ continue to show strong possible support beneath price.  One of these scenarios is false and will break, and the pressure now is on the NASDAQ and Russell Indexes, as support (via daily and weekly moving averages) is directly being tested.

Still, even traditionally defensive sectors and stocks were taken down today (such as Health Care and Consumer Staples – both down 1.6% today).  These are traditionally the havens money managers gravitate towards when they want to remain defensive (but must be fully long/invested).

Let’s continue to keep a close watch on the market, in terms of possible renewed strength, or continuing weakness, as this week could indeed be a transformative one.

4 Comments

4 Responses to “Was Anything Up on Monday?”

  1. TraderMD Says:

    According to the dashboard I have setup @ Finwiz: FNM, FRE, MBI and TIE… lol, but not a whole lot else and obviously no entire sectors.

    Today I was thinking to myself that possibly the entire market can just sell off on a leg lower and maybe that’s what the market needs to setup a true tradeable rally?

  2. todd Says:

    Corey,
    I couldn’t thank you enough for the upkeep of your blog, the information within is invaluable to me. I was curious to hear of your progress with the CMT process. How long have you aspired to be a CMT and have you finished all of the exams required? Did you meet any contacts within the CMT that helped you on your journey? Your posts have really helped me progress in my technical approach to the markets and I thank you for that.

    -todd

  3. Corey Rosenbloom Says:

    TraderMD,

    It’s funny that Freddie & Fannie, which almost everyone expect to plunge, were some of the few stocks that were up on Monday. Oh, the ironies of the market.

    I suspect we’re due for a new leg down, particularly because the primary trend is down and this recent rally has come on such anemic volume, but either way it won’t be easy on longs or shorts. There’s so much choppiness that it’s driving people crazy – the market can’t seem to find clear direction.

    We probably still have some way to go before the market bottom is put in place, but we’ll continue to monitor developments carefully each day – it’s come to that… day to day monitoring.

  4. Corey Rosenbloom Says:

    Todd,

    Thank you so much for reading and for the compliments – I feel honored.

    I’ll try to follow up with an email, but in short, the formal educational approach provided by the CMT has added structure and a concrete progression to learning the basic and advanced principles of technical analysis, all the way from Charles Dow to Elliott to indicators to statistics and beyond.

    I’ve completed levels I and II and am working towards the essay based (written) Level III exam later this year – the exams were much harder than anticipated.

    Right now, no, I’ve not met any CMTs in person, but I’ve not attended any of the functions/conferences they present. I’m more connected with the “Traders Expo” crowd and speakers than with the CMTs at the moment. The MTA strongly encourages collaboration and communication.

    If I can be of further assistance, please let me know.