Stocks got hit with some selling pressure on Thursday after another 3.8 million Americans filed for unemployment. The losses were stemmed to some degree by strong earnings reports from Alphabet and Microsoft and that helped the Nasdaq hold up much better than the others.
After leading the way for several days in a row, the Russell got hit yesterday and fell 3.68%. That was by far the worst performance of the four. The Dow lost 1.17% and the S&P dropped 0.92%. The aforementioned Nasdaq only lost 0.28%.
All 10 sectors lost ground on the day, but the percentages were vastly different.Three sectors lost less than 0.5% and they were communication services (-0.44%), technology (-0.45%), and healthcare (-0.46%).
The materials sector fell 2.97% and that was the worst performance of the bunch.
The financial sector dropped 2.52% as the second worst performer.
There were a total of four sectors that fell over 2.0%.
My scans turned far more negative on Thursday with 153 bearish signals and only four bullish signals.
The barometer plunged once these results were added in to the equation. The final reading last night was -72.8, down from -17.2.
Among the many stocks and ETFs on the bearish list last night was the iShares China Large-Cap ETF (NYSE: FXI). The fund has rallied sharply off the March low, but could be facing some resistance now. In addition to being on my bearish list, there was a bearish signal from the artificial intelligence site I use, Tickeron. Of the past 100 signals, 90% have been successful.
The $40 level stood out on the chart as that area served as support back in December and again in January. The fund did break the support in early March and dropped all the way down near the $33 level and it has now rallied back up to that area and then turned lower yesterday. The stochastic indicators hit overbought territory and made a bearish crossover last night.
Buy to open the June 40-strike puts on FXI at $2.50 or better. These options expire on June 19. I suggest a target gain of 75% for this trade and that means the fund will need to drop to $35.60. The target is only 7.8% below the current price so it should be able to get there. I suggest a stop at $40.25.
— Rick Pendergraft