Market Overview

Have We Seen The Top Of The Market?

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There is always someone trying to call the top in the market. Obviously, you won't know the answer until time has passed and the market significantly moves in the opposite direction. Remember the March 2009 bottom? It was not officially recognized as the bottom until several months (or years) later.

So in an attempt to be in front of the mainstream media, who will praise every decline as an opportunity to “buy the dip,” let's examine a recent series of events that may be indicating the five-year rally may be over.

To begin with, the ridiculous amount of buying that took place on last Friday's Quadruple Witch Expiration, both on the open and close, resembles an “Upside Capitulation.” As the S&P 500 Index reached new all-time highs off the open, the market spent the remainder of the day in full retreat, closing near the lows for the day.

This trading action was highlighted in great detail during Monday morning's Premarket Prep. Among the discussion was how the enormous buy imbalances from Friday's Quadruple Witch Expiration forced the S&P 500 Index to a new all-time high (1883.97).

Several major issues opened at their highs for the day and never sniffed the opening print for the remainder of the session. Click the link below to hear the segment from Monday morning's broadcast.

More importantly, instead of rebounding from Friday's rout, after a higher open the index has plunged through Friday's low. Unless the “buy the dippers” from Friday's close took advantage of the higher open Monday morning to exit their longs, they too are under water and will be looking to exit their losing positions on rallies.

Another characteristic of the aging bull market has been its ability to balance the shifts between sectors.

In other words, when the momentum stocks are hot, you can identify the move out of blue chips and into the momos. On the other hand, when the momos begin to tire, money moves out of them and into more conservative stocks.

There is always a sector picking up the slack, so that each decline is masked and the overall market is still perceived as “healthy.”

On Friday and Monday, this has not been taking place. The momos are getting killed after Friday's rout. Google (NASDAQ: GOOG) is lower by another 32 points after shedding 14 points on Friday. Tesla Motors (NASDAQ: TSLA) is lower by 16 points after losing six points on Friday. Netflix (NASDAQ: NFLX), the king of momentum stocks, is lower by 31 points after losing 19 points on Friday.

Facebook (NASDAQ: FB) is lower by three points in Monday's trading and now changing hands some eight points from its all-time high ($72.59). Twitter (NYSE: TWTR), which lost its momentum long ago, crashed through the major support at $50 and has entered an area with very little support until $45.00.

Another huge momentum sector getting destroyed is the biotechs. The darling of the last few years is following through on Friday's rout with more selling. Biogen (NASDAQ: BIIB) is lower by 17 points after declining 28 points on Friday. Celgene (NASDAQ: CELG) has declined eight points during the last last two sessions and is over 30 points from its all-time high ($174.66). Gilead Sciences (NASDAQ: GILD) has had a more orderly sell off, but has lost 10 points since March 13. Amgen (NASDAQ: AMGN) is now off its all-time high (128.98) made last Thursday by 29 points.

While these stocks are deeply in the red, so are many of the financials and other blue chip stocks. The best barometer of value stocks would be Berkshire Hathaway (NYSE: BRK/B), which recently broke out to new all-time highs. But this stock is trading lower as well, down $0.90 at $124.30. If the broad market goes into all out retreat, Berkshire may not find any support until the area it broke out from at $120.00.

Related: A Closer Look At Marijuana Stocks With Alan Brochstein

It may be too early to determine if we have indeed seen the top, but there are a few things that investors should keep in mind over the next few days.

Can the market quickly recover from its recent rout? At this time, the S&P 500 Index futures has found temporary support at its March 19 low (1842.50). It will be important for the index to maintain this level and rebound to Friday's close (1857.00).

If not, the index will surely test the Ukraine-Russia turmoil low spike at 1823.50, which coincides with several lows in the index from late February. Beneath that level, there may not be any major support in the index until its February 5 low (1725.00), which is 100 points lower.

So how should the typical investor, who may not pay attention to daily fluctuations in the market, interpret this information? With caution. Take a good look at your portfolio over the last five years and attempt to identify levels where you may want to lock-in profits, if the issues in your portfolio do indeed decline.

Posted-In: biotechs Options House PreMarket Prep Quadruple Witch Expiration S&P 500 IndexTechnicals Intraday Update Trading Ideas Best of Benzinga

 

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