Indexes gapped down at the open, stayed flat most of the session, then sold off a bit into the close. This should not be a surprise to any of our readers as the markets were as overbought as we’ve seen in a decade. The S&P 500 fell 1.12% and the NASDAQ 1.26%. Bad news from China weighed on markets; China’s exports fell 25.4% year-over-year in February, more than expected and the largest since May 2009. Analysts largely attributed the sharp drop in the data to a slowdown in business activity around the early February Lunar New Year holidays. Exports for the first two months of the year were still down 17.8% and imports off 16.7% from the same period last year.
“I think a little bit of profit-taking after the run-up that we’ve seen. We’re in a bit of a news vacuum this week. Earnings are all done. China trade data was shockingly bad. … The question keeps coming out. How bad is the slowdown in China?” said Ben Pace, chief investment officer at HPM Partners.
“I do think the numbers suggest the Chinese economy is weaker than the government says it is,” said David Kelly, chief global strategist at JPMorgan Funds.
Fun fact: The more you earn, the more you drink alcohol.
Some 78% of those with an annual household income of $75,000 or more say they drink, compared with 45% of those with a household income of less than $30,000. In the U.S., richer drinkers also prefer wine over beer, but just barely (38% to 36%). Beer is most popular with those earning between $30,000 and $74,999 (44%), according to Gallup. Wine is the preferred drink among college graduates, while those who have a high-school diploma or less prefer beer.
As mentioned yesterday we were due for a pullback. The nature of that pullback, and then the action immediately following it should give us a lot of insight on the intermediate outlook of the markets. After holding over these key trendlines in blue for 4 and 5 days respectively, today saw a pullback to just below those lines.
“I think after this sell-off the next rally is going to tell us more than this sell-off on whether or not this was a really good bottom,” said Bruce Bittles, chief investment strategist at RW Baird.
[Please note the “percent change” on the S&P 500 chart is incorrect, while the closing price is accurate]
Just as the Russell 2000 outperformed yesterday to the upside, it underperformed to the downside today.
The NYSE McClellan Oscillator fell from “once a decade” overbought to levels (in the 60s) we’d normally consider extremely overbought.
Oil showed a similar reversal as the general market – no surprise here as the yellow band we highlighted in yellow should be a bit of a resting area as it provides some resistance.
Goldman Sachs analysts said the recent rally in oil was premature as prices would need to remain lower for longer to help rebalance the market later in the year.
Jetblue (JBLU) plunged 9 percent after announcing a 10 to 10.5% drop in February’s preliminary revenue per available seat mile.
Here are some individual charts via MarketSmith:
We’ve been talking up gold a lot lately but have neglected the gold miners; the ETF for the group (GDX) has simply been on fire. Relative strength of 97! Today was a big reversal but considering the massive move from $14 to $20 in under a month it’s to be expected.
Similarly the ETF for the oil explorers (XOP) pulled back sharply after a hectic run the past few weeks.
Shake Shack (SHAK) and Urban Outfitters (URBN) had polar opposite reactions to earnings.
Shake Shack tumbled after the burger chain issued disappointing results and forecast. Shares of Urban Outfitters gained after better-than-expected sales for its Free People brand.