Stocks got pummeled on virtually all corners of the market on Monday, but it's not at all clear if the market is ripe again for a new market correction. Meanwhile, Intel (INTC) cut its early losses bullishly and Boeing (BA), which triggered a key sell signal on Wednesday for recent new shareholders, edged higher for a second straight session.
XThe Nasdaq composite dropped the hardest among the major indexes, falling nearly 2%. At one point, the tech-driven index was down as much as 2.6%.
But even at the intraday low of 7285, the Nasdaq actually stayed above its important 50-day moving average. The leading index, currently up nearly 6% year to date, also stands 4% below its March 13 peak of 7637.
The Dow Jones industrial average, hurt by eight of its 30 components falling 2 points or more, sank 1.3%. The S&P 500 lost 1.4%. Defensive issues paced the upside, including gold mining and food names.
Solar stocks also bucked the decline, and IBD's Energy-Solar industry group ranks a solid 32nd among 197 industry groups for six-month relative performance. While Canadian Solar (CSIQ) helped lead the way, rising more than 6% to 16.59 in heavy turnover on big Q4 results (earnings up 321% to $1.01 a share, revenue up 66% to $1.11 billion), the true leader in the group is IBD 50 name SolarEdge Technologies (SEDG).
Boeing undercut its 50-day moving average deeply on Wednesday in big volume, a clear-cut signal that some institutions eagerly took profits after the aerospace giant's big run. However, on Friday it did not usher a second sell signal despite falling 6.8% for the week.
The reason? Boeing saw heavy turnover last week, but it didn't rise more than 40% above the 10-week moving average. The Dow Jones industrial component also saw a little bit of lift off its lows for the week.
IBD research has found that when a true market leader takes out its 10-week moving average in a big way and weekly volume screams more than 40% above average, it's usually a very reliable indicator that a greater correction is underway. So for those who do not have a large profit cushion, taking at least partial profits is a savvy portfolio-management move.
The Dow utility average fell 0.8%. The yield on the benchmark U.S. Treasury 10-year bond is around 2.85% ahead of a two-day Federal Reserve meeting on interest rating that starts Tuesday.
Megacap techs bore the brunt of the selling, as did large-cap and midcap names in the semiconductor, computer and telecom gear sectors. Alphabet (GOOGL) fell 3% to 1,100.07 in fast turnover and dove below its 50-day moving average for the second time in nearly three weeks.
Alphabet still harbors a 9.3% gain since its October breakout from a constructive flat base with a 1,006.39 entry.
Meanwhile, Intel (INTC), one of the four tech members of the Dow industrials, showed buying support at 50 as shares fell just 0.6% to 50.84 in quiet trade.
Notice on an IBD chart or MarketSmith chart how Intel's relative strength line, painted in blue, has not given much ground after bolting higher in February.
Plus, since Intel fell less than the S&P 500, expect to see a bump up in the RS line. This line compares a stock's day-to-day performance with the large-cap benchmark.
Intel has recently staged solid profit growth, with earnings rising 21%, 4%, 22%, 22%, 26% and 37% vs. year-ago levels in the past six quarters. The semiconductor giant, eager to become a force in self-driving cars and other new markets, has also posted modest to high single-digit revenue growth for nine quarters in a row.
At this point, Intel shares are still well-extended in price after breaking out of a long saucer base at 36.80 back in mid-September. Watch for a potential new base to form or a fresh test of support at the 10-week moving average, visible only on a weekly chart.
The stock earns an enviable 95 Composite Rating on a scale of 1 to 99 at IBD Stock Checkup, topped only by Microchip Tech (MCHP) and STMicroelectronics (STM). Both of these names sport a 96 Composite. Cypress Semiconductor (CY), also in the semiconductor manufacturing industry group, holds a 95 ranking.
STMicroelectronics, one of the most exciting semiconductor firms based in Europe, dropped more than 1% on Monday, but volume shrank 45% below average. At 24.23, the stock lies just 4% below its 52-week peak of 25.30 and it's now formed a narrow cup with handle.
Notice on a daily chart how the stock has eased lightly in price over the past five sessions. Volume was bone dry. That's ideal action in a short handle.
The buy point in this first-stage base is 24.78, 10 cents above the handle's high.
Earnings at the diversified maker of controllers, smartcards and power transistors powered 250% higher to 98 cents a share on a 20% jump in sales to $8.35 billion. The Street sees earnings rising 33% to $1.30 a share this year and up an additional 14% in 2019.
(Please follow Saito-Chung on Twitter at IBD_DChung for more commentary on growth stocks, breakouts, sell signals and financial markets.)
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