2015 started out with an incredibly choppy market and March has been no different. The S&P started the year with a decline of 3% in January, followed by a 5% February rally and now it sits down 2% for March and flat for the year. That's a lot of action and little to show for it.
We have the potential for double tops in the S&P 500 and Nasdaq on shorter time frame views while the NYSE has yet to breakout of a large 9 month consolidation. The VIX rallied this week but hasn't yet reached levels seen at other recent short term bottoms. This could put the odds of a bigger pullback into play.
Meanwhile, the previously leading small caps (IWM) had their biggest one day fall since the October bottom. What's interesting about this chart, which plots the daily % return (ROC) in the bottom panel, is that the Russell 2k had this big drop while near 52 week highs. During the run-up since 2013 of most the big down days have occurred closer to bottoms and after some significant weakness.
This type of back and forth action is symptomatic of an uncertain market. You can take your pick of what to worry about: the Fed raising rates, oil, middle east, strong dollar, earnings estimates.
One of our priorities in these types of environments is to identify trends and see where money is flowing. Right now we see that conglomerates took the brunt of the selling while basic materials held up best. Healthcare, technology, and financials also sold off and if we drill down to individual industries, we see that biotech's had a huge reversal off highs but found some footing on Friday. An easy way to find what was moving during the week is this color coded ETF heat map from Finviz.
We touched on the dollar in a recent post and it continues to bear watching. After hitting significant overbought levels (RSI) the dollar made a visit to the lower channel line and looks to be attempting to stabilize and hold this level while working off overbought conditions. This could eventually set the stage for another move higher.