The major indexes may have reached a short term top here as they failed to break above yesterday’s highs. Making matters worse is that the S&P500 broke below its prior 2 day lows while the Dow Jones broke below its prior 4 day lows. On the bright side, both the NASDAQ and financial sector (XLF) managed to stay above their lows from yesterday.
There could be some downside for the indexes in the short term but the action in the NASDAQ and XLF today tells us that those on the sidelines are prepared to buy dips. Sectors that didn’t fair well were more macro related, like materials, energy, and industrials. Those sectors were likely hit by the pullback in oil and comments from the CEO of BHP Billiton (the world’s largest miner), in which he said the company is seeing signs of iron ore demand from China “flattening out.”
Again though, we can counter this negative with a positive, take the price action in FCX for example. If global demand is slowing down then surely the largest copper miner in the world (which is exactly what FCX is) would take it on the chin. Well after initially being down earlier, FCX clawed all the way back to break even, managing to stay above key support @ $37.75 the entire time. Watch that $37.75 level closely as that would be a breakdown we would certainly consider bearish in the short term.
Lastly, with the S&P500 breaking below its low from yesterday, a sell signal has been generated. We’ll have a full analysis of this sell signal in our @ the bell commentary for tomorrow.
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