Dear Reader,
Wall Street Sector Selector remains in "red flag" status with bearish equity positions and a bullish precious metals ETF.
Markets generally moved in our favor this week as the Dow Jones Industrial Average took its largest decline year to date, dropping more than 340 points or 2.2%.
The S&P 500 (NYSERCA:SPY) shed 2.1% and the Nasdaq Composite (NYSEARCA:QQQ) slid 1.6%, while the Russell 2000 (NYSEARCA:IWM) index of small cap stocks slid 2.2%.
On My Stock Market Radar
In the chart of the Dow Jones Industrial Average (NYSEARCA:DIA) below, we can see how all major technical indicators are in decline.
RSI has fallen from overbought levels near 70 to oversold levels near 30 and that could indicate the possibility of a short term bounce in the near future.
Momentum is declining, trend has shifted south and the index broke the widely watched 50 day moving average which is an indication of short to intermediate term weakness.
Nevertheless, the Dow Jones Industrial Average (NYSEARCA:DIA) is still well above its 200 day moving average, some 4.7%, and so is considered to be in a longer term uptrend on a technical basis.
However, technical market internals remain troubling with weakness in advancing stocks relative to decliners, new lows vastly outnumbering new highs, and all of this occurring on low “dog days of summer” volume.
chart courtesy of StockCharts.com
Adding it all up, the Dow Jones Industrial Average, (NYSEARCA:DIA), S&P 500 (NYSEARCA:SPY) Nasdaq 100 (NYSEARCA:QQQ) and Russell 2000 (NYSEARCA:IWM) weakened considerably this week and appear to be rolling over from recent highs.
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Stock Market News You Can Really News
Aside from the major indexes, the bond market (NYSEARCA:IEF) took a wild ride last week as yields spiked with 10 year Treasury bonds rising to 2.8% and the 30 year bond (NYSEARCA:TLT) yield jumping to 3.85%, still relatively low but the highest yield since the summer of 2011.
VIX (NYSEARCA:VXX) the CBOE S&P 500 Volatility Index, also known as the “fear index” jumped sharply last week, as did the precious metals complex.
Read “VIX Continues To Roar”
Read “Gold Is On The Move”
Economic reports were mixed with housing starts missing expectations, probably in response to higher interest rates, while University of Michigan consumer sentiment fell to 80, missing expectations and last month’s reading of 85. The Philadelphia Fed report, industrial production and Empire State index all declined but the home builder’s index and weekly jobless claims improved.
In earnings, the retail sector (NYSEARCA:XRT) remained weak with J.C. Penney, Macy’s, Nordstrom’s and Kohl’s under pressure and Dell, Wal Mart and Cisco all reported less than stellar earnings.
Read Cisco, Wal Mart Tank, Soros Goes Bearish On S&P 500
Next week is light on economic news with the FOMC minutes, PMI and weekly jobless claims being the standout data points.
Retail sector (NYSEARCA:XRT) earnings will also stay in the spotlight with reports from Ross, Gap, Target, Staples, Best Buy and J.C. Penney’s, all of which will be sliced and diced in an attempt to measure the underlying strength of the U.S. consumer and economy.
Bottom line: The Dow Jones Industrial Average (NYSEARCA:DIA) and other major stock indexes show weakness and signs of rolling over in the dog days of summer. Multiple headwinds including rising interest rates, falling earnings and questions over future support from the Federal Reserve put further downward pressure on U.S. stocks as the global financial world goes on vacation.
We will be publishing our market updates on a sporadic basis this week as staff members take vacation and the world slows down in the "dog days of summer." I hope you have a great last two weeks of August.
August 18, 2013 
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