The major market averages show some mixed results as the first half of today's session is complete. The Dow Industrials (INDU) are hanging onto gains of 38 points at 9,872, while the NASDAQ Composite shows a decline of 15 points at 1,701.
We did get an alert from the 10-year YIELD today with a YIELD trade at 4.8% and this generates a sell signal on our point and figure YIELD chart and has this bond looking as if some buying is being found (buying in bonds creates higher price and lower YIELD). Current YIELD level for this bond is right here and if we were to see a YIELD much below current levels, we would take that type of action as a more defensive posture by the market as it seeks out the safety of the Treasury bond market to perhaps forgo the higher perceived risk in stocks.
In last night's market wrap for premierinvestor.net we discussed a bearish trade in shares of Microsoft (NASDAQ:MSFT) $57.27 - 1.34% with a trigger point at $58. The stock traded that $58 level in early morning trading, saw some buying to the $58.75 level, but looks to be turning lower along with the action we're seeing in the 10-year YIELD. Shares of MSFT look lower here and may also be a near-term negativity for broader technology.
Sector weakness today is found in the CBOE Internet Index (INX.X) -2.72%, GSTI Software Index (GSO.X) -2.8%, Securities/Brokerage Index (XBD.X) -2.4% and Airlines (XAL.X) -2.64%.
Sector strength is seen in Treasuries as YIELDS across the board are lower (buying in Treasuries) and some of the more economically sensitive sectors like energy Oil Index (OIX.X) +1.6%, Oil Service (OSX.X) +2.58% and Natural Gas (XNG.X) +1.45% are showing gains. Also on the plus side are Forest/Paper stocks as the Forest & Paper Products (FPP.X) trades higher by 1.35%.
Current market action looks to be that of a MARKET that is looking to play some defense and opting for some earnings predictability.
In time, it is our view that the bullish percent charts continue to show that risk is being removed from the markets as more and more sell signals are given in the technology space. It certainly appears that the bulk of the selling is found in technology that is more computer related.
In recent sessions, we've been more bullish on the Biotechs as it relates to anything technology. While today's current 1.2% decline in the Biotech Index (BTK.X) is contrary to what I felt was looking to be a bullish move in the making, I still note this sector performs strong RELATIVE to what is taking place for broader technology.
However, I'm a realist and understand I can't put food on the table with relative strength, so stops remain as outlined until triggered. For our bullish play in the Biotech HOLDRS (AMEX:BBH) $116.20 -1.02, that stop remains the $114 level. The session low for the BBH today is $115.05.
The current market action is still that of defensive and bullish traders should remain cautious and be willing to take some defensive action for their accounts.