Multiple sectors posted decent rebounds to lift the overall market last week.

After weeks of declines in multiple sectors the market finally found some pillars of support as some of those oversold sectors rebounded. The biotech sector was a major driver as the Biotech Index sprung off the 200-day average to recover half of their prior three weeks losses. There was no single spark other than oversold and the normal flow of medical trials.

The biotech index plunged 707 points (-14.3%) from the March 13th high to the April 6th low. The support was solid at the 200-day average and the rebound gained 456 points (10.7%) in only six days. This was a major support pillar for the Nasdaq.


The Semiconductor Index declined -204 points (-10.8%) over the same period and then rebounded 7.5% for the week.


As I pointed out last weekend the chips and biotechs were a major drag on the Nasdaq for the prior three weeks. Similarly, they were major support in last week's 3% gain on the Nasdaq. In fact the $BTK far outperformed the Nasdaq.



The FANG stocks were still diverging into two groups. Amazon and Google were holding ner their relative highs but Facebook and Netflix were still holding at the correlation lows but trying to recover. Until these stocks begin moving in the same direction again, the Nasdaq will still be weak even if the BTK/SOX are positive.


The Nasdaq tried to move over the 7,100 resistance level but was pulled back at the close on Friday as traders headed for the exits ahead of the heightened weekend event risk. Without this risk on Monday, the index could reassert its leadership role. Note the MACD has turned positive and the CCI is close to positive territory.


Despite the 2% gain for the week the A/D line on the S&P was flat. The volume was very low with two days at 6.1 billion, one day at 6.2 billion and Friday only had 5.8 billion shares total volume. Tuesday was the highest at 7.1 billion. With four days averaging just over 6.0 billion shares this was a total lack of conviction in either direction. Traders were sitting on the sidelines waiting for the Syrian shoe to drop.


The 2,675 and 2,700 resistance levels are going to be tough to break unless we get a major short squeeze open on Monday. Note the 50/100 day bearish cross but the MACD has turned positive and the CCI is close.


The Dow spent most of Friday over resistance at 24,500 but collapsed with a 400-point decline heading into the close. This was clearly event risk selling that could be immediately reversed at the open on Monday. The 50/100 crossed and the MACD is positive and CCI should be positive on Monday.


The Russell spent most of Friday over the 1,550 resistance level but returned there at the close. The small caps have been vying for the lead with the Nasdaq. On this chart, the CCI has already gone positive along with the MACD.


The AAII sentiment survey saw a major change in positioning with the bulls losing 5.8% and the bears gaining 6.1%. it is very rare that bearish sentiment is higher than bullish and especially this much higher. This is actually good on a contrarian basis because if means many investors were either out of the market or short and should the market rebound they will be forced to cover and chase prices.


I am cautuously bullish in my market bias for next week. The decline in volatility and the attempts by the Nasdaq and Russell to move higher, suggest investors will return to the market on Monday, assuming we remain headline free for the next couple days.

I would remain cautious until an actual trend appears.

Enter passively and exit aggressively!

Jim Brown

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