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May 7 Market Wrap

Posted on May 7, 2009 by Adam

Markets traded heavily all day on broad-based sector weakness. Defensive names in healthcare, utilities, and some consumer staples were the strongest, while everything else ended up in the red.

Concerning to me was the continued selloff in technology. In order to continue the intermediate rally we’ve been enjoying, technology will have to go higher, as will materials and financials. In addition, we’ll need to see weakness in the defensive names in the sectors mentioned above.

Bulls shouldn’t give up hope however. With the exeception of some consumer discretionary names, most upward trends seem to be intact. In addition, the technology ETF ((XLK: 22.01 -0.90%)) is resting at support off of its 200 day moving average.

Technology will need to find support here for the market to move higher.

The bank stress test results will be released at 5 PM EDT, which everyone is waiting for. I believe that a lot of today’s move was predicated on factoring in uncertainty ahead of the results. Nobody wants to hold too much risk, which makes today an ample opportunity for profit taking.

I’ll be watching the futures market when the data is released to get a sense of the market’s reaction. A bad number could send the S&P down as low as 875, which could serve as pretty strong support. A good number should mean that market is free to move higher - not that it will.

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