Tacking onto the past week’s losses, yesterday was the first decline of over 2% in more than five months for the S&P 500 (SPY). Currently, every major index ETF has now declined over 4% in the past five days.  Small caps and mid caps, in particular, have gotten hit hard as each one has fallen over 5%.  Meanwhile, the Nasdaq (QQQ) has more dramatically underperformed, currently sitting just under 6% below where it was last week at this time.  QQQ has still outperformed all other major index ETFs on a year to date basis, though.  There is also no longer any major index ETF sitting above the 50-DMA.  Whereas last week the group was entirely overbought, they head into trading today at either oversold levels or neutral and on the cusp of oversold. As seen through the long tails across each name in our Trend Analyzer, the movement towards this lower end of the ETFs’ trading ranges has been rapid. But this pullback provides a good timing opportunity considering each one is still in an uptrend over the past six months.  Start a two-week free trial to Bespoke Institutional to access our Trend Analyzer and much more.

Like the broader market, declines can be seen across the eleven sectors as only Utilities (XLU) has managed to edge out a gain over the past week.  XLU is now up just over 1% and is also the only sector ETF to sit in overbought territory.  Other defensives like Real Estate (XLRE) and Consumer Staples (XLP), while not positive, have held up better than their peers.  These two have only seen declines of less than 1% versus losses upwards of 6.29% from Technology (XLK). Despite XLK’s steep declines in the past week, it actually has yet to push into oversold territory. Along with six other sectors, XLK is in neutral territory, but similar to most other sectors, XLK has fallen below its 50-DMA. Only XLRE, XLP, and XLU have managed to hold above their respective 50-DMAs.  Some have fallen far enough below the 50-DMA to now sit in oversold territory, with Energy (XLE) doing so to an extreme degree. This is in part due to volatile oil prices over the past few days. The silver lining once again is that each of these (except for the overbought XLU) have good timing scores and XLE actually has a perfect timing rating.

The S&P 500 SPY ETF opened lower by more than 1% this Monday morning after no progress was made between the US and China on trade.  When SPY opens down 1% or more, how does the ETF typically perform during regular trading hours from the open to the close?  Since 1993 when SPY began trading, the ETF has averaged a decline of 0.27% from the open to the close when it opens down 1%+ on a Monday morning.  As shown in the chart below, Monday is the worst day of the week for a 1%+ open lower.

When SPY has opened down 1%+ on Tuesdays or Fridays, it has actually bounced back very nicely throughout the trading day with an average open to close change of ~0.50%.  On Wednesdays and Thursdays, the open to close change is basically flat following a 1%+ gap down.

Based on historical price action, big opens lower on a Monday typically see continued selling throughout the trading day, while Tuesdays and Fridays see buyers step in.  Start a two-week free trial to Bespoke Institutional to access our thought-provoking investment research and all of our interactive investor tools.

The major index ETFs have worked themselves off of overbought levels following last week’s declines which were some of the steepest of any given week so far this year. Each of these ETFs were hit fairly hard with most declining over 2% while the Dow (DIA), Russell Mid Cap (IWR), and Micro-Cap ETF (IWC) held up fairly better falling less than 2%.  On the other hand, the Nasdaq (QQQ) fell the most with a 3.2% decline, the only one to decline over 3%.  In spite of this, QQQ is still the only index ETF to have risen over 20% on a year to date basis.  Additionally, QQQ is now sitting the highest above the 50-DMA, and it’s the only one over 1% above.  Looking on the bright side of this recent pullback, every one of the major index ETFs has held onto its uptrend and now has a good timing score according to our Trend Analyzer tool.    Unfortunately, this could all change after the open today given that US equity futures are down 1.5%.  It will be important to see where things stand after the close today to see if support levels held.  Start a two-week free trial to Bespoke Institutional to access our Trend Analyzer tool and much more.

While on the Dow (DIA) closed on Friday with price below the 50-DMA, the rest found support at the 50-DMA on a closing basis.  Looking at the individual charts though, many opened on Thursday or Friday right around these levels. Intraday, each of these did in fact fall below the moving average. With futures indicating a lower open this morning, many of these are not likely to hold onto this support with the 200-DMA the next place to watch. At the same time, if intraday buying keeps up like it has, it is equally as likely that the 50-DMA can be retaken.