The markets are on their second Follow Through Day in as many months and there is a lot of distribution. You have never had a Bull Market without a Follow Through Day, but not all Follow Through Days lead to Bull Markets. Failures are indicative of Institutions selling into strength and are not a Bullish trait.
This feels more like the topping process of 2008 and less like the basing process of 2005-2007. That is no doubt a result of the fact that taxes policies and economic policies were much more pro-growth in 2005-2007 than they are today.
Critical support is obvious.
Financials
A couple weeks ago, I wrote about how Financials were at critical support and needed to see the big boys come in and buy them, or they were going to take the rest of the markets down with them.
The Regional Banks ETF (RKH) and General Electric (GE) are at critical support (GE just broke it this morning). GE had better make a stand soon, because so many Mutual Funds, ETFs and Indexes of many industries have significant holdings in GE. New 52-week lows were recently seen in Blackrock (BLK), Morgan Stanley (MS), Charles Schwab (SCHW) and Ameritrade (AMTD). Many others look horrible. Remember, Financials led the way lower in the last Bear Market, topping in 2006. I will be watching them closely here.
Retail
The Retail ETF (RTH) blew right threw the 200-day.
The Consumer Discretionary Index (XLY) just broke a triple bottom and the 200-day.
Walmart (WMT) has broken down on a rally into the 200-day.
Amazon (AMZN) has broken key support.
Target (TGT), Macy’s (M), Bed Bath and Beyond (BBBY) and Tiffany’s (TIF) have broken triple bottoms and are now below their 200-day averages.
Remember how so many were saying that the high-end consumer was holding up? With Tiffany’s blowing through support, the rich may be putting their wallets back in their pockets.
I am not making predictions on anything, I am simply showing you what is going on in the Retail Sector and it is clear that the big boys have been selling retail. Last week, lot of these companies are at levels where the big boys were historically willing to come in and defend price. They are now selling with abandon.
Technology
Tech has been a leader, but you have to wonder where things are going when you see key stocks like Cisco, Microsoft and Google breaking long term support.
Homebuilders
Some are holding on for dear life (NVR, Beazer (BZH)) while others have been blasted (Ryland (RYL), Pulte (PHM), KB Homes (KBH)).
Home Depot (HD) and Lowes (LOW) are now both trading below their 200-day averages. That puts them into Bear Markets.
This weakness is clearly a result of the ending of the housing tax credit. Housing never bottomed. It was simply propped up by a temporary government subsidy. If housing prices start to go lower again, then the consumer will feel a lot more pressure.
Commodities
Commodity-based economies like Australia (EWA) and Brazil (EWZ) have wedged up into their 200-day averages. That is a very Bearish setup. The reversal pattern I noted a few weeks ago may have played itself out.
Crude Oil (OIL) has wedged up into the old breakdown point and the 50-day average. Again, this is very Bearish.
Energy stocks as measured by the ETFs OIH and XLE are now in a Bear Market.
Agriculture stocks MOO (think Fertilizer and land movers) are now in a Bear Market.
EAFE is now in a Bear Market. EAFE represents non-US Developed markets. That is bad news…
These are a lot of ugly charts. These are very important sectors and stocks. This is how markets top, with key leadership groups breaking down first. I am not saying that we are in a Bear Market, but at best we are now in a split market where there are winners and losers. So at a minimum, you need to be very selective.
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