Market Recap for Tuesday, May 9, 2017
Consumer discretionary stocks (XLY, +0.58%) were easily the leading group on Tuesday as hotels ($DJUSLG) and gambling ($DJUSCA) stocks were outperformers. Automobiles ($DJUSAU), recreational products ($DJUSRP) and home construction ($DJUSHB) also performed quite well. The latter group held recent price support and yesterday cleared both its 20 and 50 day moving averages. I'd expect more leadership from home construction. Here's the chart:
The negative divergence is highlighted above and note that we later saw both a MACD centerline reset AND a 50 day SMA test (pink circles). The DJUSHB is now primed to provide leadership again in a rotating market - I'd continue to look for strength here.
Energy (XLE, -0.83%), materials (XLB, -0.75%) and utilities (XLU, -0.73%) were the Tuesday laggards. The XLU lost its 50 day SMA in the process, but remains in a very tight range from 51-52 where it's traded for the past two months.
Pre-Market Action
Asian markets finished mixed overnight with strength in Tokyo and Hong Kong. There are fractional gains in Europe this morning. We've seen recent breakouts in Germany ($DAX), France ($CAC) and England ($FTSE) and all of those indices remain very bullish.
Here in the U.S., the NASDAQ is showing futures just into positive territory while Dow Jones futures are lower by 32 points with 30 minutes remaining to the opening bell.
Current Outlook
The NASDAQ remains the best performing index among the U.S. majors. A negative divergence emerged in March and that held up progress for 4-5 weeks, but after a MACD reset and 50 day SMA test (pink arrows below), the NASDAQ was ready to launch and that's exactly what we've seen. Technical conditions suggest higher prices ahead with price support and the rising 20 day EMA serving as buy points for the bulls. Take a look:
5923 is price support and the rising 20 day EMA is currently at 6014, so that range is where I'd look for significant buying pressure to resume if we see short-term selling.
Sector/Industry Watch
The Dow Jones U.S. Heavy Construction Index ($DJUSHV) saw huge volume and a potentially reversing candle at key price support on Tuesday. Here's the chart:
The 415 level offers up great price support and it also coincides with the top of gap support from November. Strength off Tuesday's reversal could be great news for certain stocks within the space like JEC, ACM and PWR.
Historical Tendencies
May 11th (tomorrow) through May 16th is a mildly bullish historical period on the NASDAQ since 1971. The annualized return for this period is +20.37%. So perhaps we'll see continuation of the recent buying despite overbought conditions.
Key Earnings Reports
(actual vs. estimate):
MYL: .93 vs .92
TM: 2.32 vs 1.90
VMC: .34 vs .22
(reports after close, estimate provided):
CTRP: (.05)
FOXA: .48
NTES: 4.24
SYMC: .20
VIV: .20
Key Economic Reports
None
Happy trading!
Tom
