Major averages sold off Friday on higher volume in downside move that accelerated sharply into the close. The market has now shown two heavy-volume reversal type days off of the peak over the past two weeks, giving the NASDAQ Composite a total of four distribution days around the peak. While the NASDAQ held above the prior week's lows, the S&P 500 broke to a lower-low since the prior week's massive-volume outside reversal day following the Fed policy announcement. While the month of May generally disproved the old aphorism, "Sell in May and go away," investors should be alert to any potentially changing market conditions in June.
In economic news, we know that the stronger the economy, the greater the signs of a recovery, and the greater the odds the Fed and other central banks may start slowing quantitative easing. On Friday, economic news was mostly positive, with the Chicago purchasing managers index for May trouncing the consensus estimate of 50. The University of Michigan's consumer sentiment survey for May also beat expectations but by a smaller margin. The only downside was personal income and personal spending in April both which missed expectations.
Tesla Motors (TSLA) sold off hard on Friday to test its 10-day moving average, but barring some sort of pocket pivot move off of the 10-day line we would give the stock some time to find its footing and perhaps build a new base, something it likely needs to do following a 187% run-up over the past nine weeks.