Weak earnings and even worse conference calls drove UPS (UPS) and First Republic Bank (FRC) down right from the open, then even lower as the day unfolded. Between these stocks, two of market’s primary fears came to the forefront–a weakening consumer and problems in the banking system.
Further confirming that the market would not recover from these fears and a lower open was the price action in the TLT, which gapped higher and continued higher. TLT is still where risk-off equity money runs to hide and wait.
Lower interest rates, fear, and lower stocks gave GLD reasons to rally out of a reversal pattern. After testing the 184 level and breaking out of an inside day pattern, it’s set up for a potential run higher IF it can close over its nearby 10-DMA and then continue higher. Gold bulls should keep an eye on it.
UPS is the obvious reason that IYT was the biggest loser in the sector summary table today, and if you’ve been reading this Daily over the last couple of days, then the second biggest loser, discussed below, won’t surprise you. Additionally, the intraday patterns we’ve been discussing based on the Opening Range did their job today by highlighting that it was not a good day to try to buy the lower open and instead, it would be a trend day lower.
The second biggest losing sector was, as we’ve been following, SMH. Today’s anticipated breakdown puts SMH well below its 50-DMA, while the SPY and QQQ are still above their 50-DMAs. Until it gets back over its 50-DMA or develops a bullish reversal pattern, this should be avoided.
Every sector was down today, so there are likely to be more trend-down days in the near term. Today was a good example of how to recognize and avoid them. Below, you’ll see the intraday charts of the SPY and QQQ, with the Opening Range levels marked by the red and green horizontal lines.
Today was a good example of an OR breakdown in the SPY that attempts to reverse, but it was not confirmed by the QQQ.
After the failure of the QQQ to trade back over its OR low, the retracements to the OR low pattern in both the SPY and QQQ became confirmed bearish trend continuation patterns, and the trend down day resumed with a vengeance.
This is the busiest period of earnings season, so every day has the potential to be filled with surprises. Keep an open mind and a disciplined approach to your trading.
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Mish walks you through technical analysis of TSLA and market conditions and presents an action plan on CMC Markets.
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May 2nd-5th: StockCharts TV Market Outlook
- S&P 500 (SPY): The new range to watch is 405-410 on a closing basis.
- Russell 2000 (IWM): 170 support–180 resistance.
- Dow (DIA): Over the 23-month MA 333–support to hold.
- Nasdaq (QQQ): 306 support, over 320 better.
- Regional Banks (KRE): 44 now pivotal resistance.
- Semiconductors (SMH): 245 resistance, with support at 235.
- Transportation (IYT): Still under the 23-month MA with 224 resistance; 215 is Real Motion support.
- Biotechnology (IBB): 130 major pivotal area–135 resistance.
- Retail (XRT): 58-64 trading range to break one way or another.
Geoff Bysshe is the co-founder and President of MarketGauge.com. For nearly 20 years, he’s developed trading products, services, strategies and systems while also serving as a trading mentor for MarketGauge customers. He also provides regular commentary and trading instruction in the MarketGauge blog. Geoff is a former floor-trader who was a member of the FINEX trading the U.S.