The major market indexes bounced back from Friday's sell-off in mixed volume, with the NASDAQ trading higher volume on the day while the NYSE-based indexes, which rallied considerably more, saw a decrease in volume compared to Friday. However, some divergence was evident as declining stocks exceeded advancing stocks on the NYSE by a margin of about 17 to 14 and many leading stocks were hit hard yesterday, including the bio-techs. A weak PMI of 49.0, implying contraction, again put the market in the position of anticipating a continuation of QE. Given that the market has proven itself to be highly dependent on the continuation of QE, economic news of the day may continue to lead to cathartic volatility as the market responds to this idea of QE "on again-off again."
Very little occurred yesterday in the way of actionable buy points, adding to the sense of weak internals despite the strong index rally. However, Ocwen Financial (OCN) was able to muster a pocket pivot buy point as it has pulled back to top of its prior base and its recent breakout point in the low 40's.
Three-D stocks took a sharp hit, with Three D Systems (DDD) finding support at its 20-day moving average while Stratasys (SSYS) has broken down much harder, but was able to roughly hold its 50-day moving average yesterday as both stocks' recent breakouts to new highs have faltered. This type of action, however, is typical of many leading stocks as breakouts falter or lead to very little in the way of upside follow-through. In our view caution continues to be warranted as the market works through its current correction/consolidation.