The Gilmo Report

July 2, 2017

July 1, 2017

The NASDAQ Composite Index’s attempt to hold a bounce off the 50-day moving average failed quickly on Thursday, even before the opening bell. The NASDA 100 futures were already down overnight, presaging another brutal sell-off in the big-stock NASDAQ and tech names.

The more important sign of the failure was the fact that a number of undercut & rally long set-ups that appeared on Wednesday failed rather quickly. Other stocks simply broke near-term support. Based on the action of individual stocks, having a healthy store of cash strikes me as the most prudent position to be in currently. The past four days have been a series of sell-offs followed by logical rallies based on the position of the index within its chart. We can see that Tuesday’s sell-off found near-term support at the 50-day line on Wednesday, leading to a logical bounce off the line.

On Thursday, the index rolled over again and broke below its 50-day moving average, but undercut two prior lows in the pattern from earlier in June. That was a logical undercut & rally move on a short-term basis. Friday the index held in a tight range and mostly in positive territory as it attempted to regain the 50-day moving average. Going into the close, however, sellers sent the index back into the red on light volume.

This is unresolved action, and I cannot rule out further downside from here. At the same time, I want to be alert to where stocks on my long watch list are trading, as there is always the possibility that the current position of the indexes might result in some sort of “Ugly Duckling” recovery that has become the market’s trademark.

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