The Dow Jones Industrial Average was the only major U.S. index
to post a positive close for the week of March 24, but it was a
meager 0.1% gain. Meanwhile, the tech-laden Nasdaq 100 and
small-cap Russell 2000, both of which led the 2013 broad market
advance, were down by 2.2% and 3.5%, respectively, for the week.
Year to date, the broad market S&P 500 is the only major
index in positive territory, up just 0.5%.
#-ad_banner-#From a sector standpoint, my own ETF asset flow
metric indicates that investor assets most aggressively moved
into energy and consumer staples last week, and most aggressively
moved out of health care and industrials.
Nasdaq 100 Closing In On Downside Target
In last week's Market Outlook, I pointed out an emerging bearish
chart pattern in the market-leading Nasdaq 100 index. The
head-and-shoulders indicated that a decline below underlying
support at 3,617 would confirm the pattern and target an initial
3.4% decline to 3,530.
The chart shows the index declined below 3,617 support on
Monday, March 24, subsequently collapsing by 110 points, or 3%,
into Thursday's 3,543 low before finishing the week at 3,571.
Last week's breakdown below the 50-day moving average (
) suggests that a minor bearish trend change is emerging in the
index and clears the way for a deeper decline over the next few
weeks, first to 3,530 to meet last week's initial downside
target, and then potentially to 3,423 to 3,419 to test the Dec.
18 and Feb. 5 benchmark lows. This emerging minor downtrend will
remain valid as long as the 50-day MA, currently situated about
1% above at 3,622, loosely contains as overhead resistance.
Investors Moving Back Into Defensive U.S.
Last week, I said the U.S. 2-year/10-year yield curve has been
situated below its 200-day MA (major trend proxy) since March 13,
suggesting an emerging trend toward narrowing or "flattening." I
commented, "With the yield of the 2-year note anchored near 0%, a
flattening yield curve would also indirectly suggest a decline in
the yield of the 10-year note and a coincident rise in long-dated
The chart of the
iShares 20+ Year Treasury Bond (NYSE:
shows a bullish double-bottom pattern was confirmed by last
week's rise above the $108.73 midpoint of the August and December
2013 lows, to the ETF's highest level since July.
As long as the 200-day moving average at $106.07 loosely
contains as underlying support, I view this pattern, which
targets an eventual, additional 5.3% rise to $115.20, as more
evidence of an emerging decline in long-term U.S. interest rates
as long-dated Treasury prices rise.
Last week's sharp decline in the Nasdaq 100, which tends to
lead the broader market both higher and lower, accompanied by a
rise in long-dated U.S. Treasury prices, suggests an emerging
shift in investor assets toward more defensive areas. Moreover,
with March employment data scheduled for release on Friday, last
week's investor apprehension could stretch into this week while
the market frets over the new numbers.
This article originally appeared on ProfitableTrading.com:
Market Outlook: Investors Go on the Defensive,
More Weakness Ahead?
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