Sellers in Control, but not in Force

The pressure on stocks going lower persisted Wednesday, but a bounce at the end of the session pushed the major index ($SPY/$QQQ) ETFs off the lows. I think this is just an orderly pullback at this stage. I say that because I did not see the selling pressure in small-caps ($IWM) or mid-caps ($MDY). Both actually closed with small gains, holding up well on Wednesday.

Any relative strength in these small and mid-caps would be a positive for the overall market. Watch resistance at $123.5 on the $IWM, it needs to break if this down trend is going to shift.

There were three offensive sectors that were leading to the downside: Consumer Discretionary ($XLY), Technology ($XLK), and Utilities ($XLU), all down around ~1 percent.

Bonds ($TLT) continue to slide sharply and is now down over eight percent from its April high. The decline in bonds is a shock to the system that creates uncertainty, just like the surge in the dollar last summer-fall. I am not sure, however, if this slide in bonds and surge in yields is really bearish for stocks. The money going out of the bond market has to go somewhere, and that somewhere could just be stocks.

Run the Tradespoon Scoop Tool to get our most bullish stocks, and check out our newest Forecasting Tool.

Have a great trading day!