Dow Goes One Way, Nasdaq Goes The Other Way, This Guy’s Sayin’ Whaddya Want From Me?

by CC September 29, 2011 4:15 pm • Commentary

Tonight on the news you’ll hear how the stock market was up on the day with the Dow Jones average having a pretty nice gain, especially considering it dipped briefly into negative territory. But if you were long some of the high flying tech and consumer discretionary spending names, it was a bit of a bloodbath at one point. The Nasdaq was down over 2.3% at one point before staging a late day rally. The key to this divergence was a selloff in high flying stocks for once, as opposed to everyone selling the banks. Here’s a chart that Bespoke put out around 2ET:

With the S&P 500 down slightly intraday, the Consumer Discretionary is absolutely tanking, while Utilities and Financials are solidly in positive territory.  It’s rare to see this big of sector divergence in a single day of trading.  Investors are fleeing retail stocks as fast as they can.

Earlier in the day Bespoke ran a chart focusing on tech vs industrials that they first highlighted in August:

As they stand now, the relative strength of Industrials is right near its lows for the year, while the relative strength of Technology is near its highs.  Typically, the Technology sector is strongest during the fourth quarter, but this year the sector appears to have gotten a head start on its seasonally strong part of the year (that is until today at least).

Dan highlighted something from Bloomberg on Quick Hits earlier today where some of the more speculative names that we love to hate on this site were taking it on the chin and were at risk for breakdowns:

Pretty Girls’ Baidu, Chipotle, Fossil at Risk for Drop: Roque 15:19
WJB Capital technical analyst John Roque created “The Pretty Girls” index of market darlings such as Baidu, Chipotle Mexican Grill, Fossil; says index recently broke neckline support of a head-and-shoulders top, signaling “important downside risk ahead.”

Index components: Baidu, Chipotle Mexican Grill, Deckers, Estee Lauder, Fossil, Green Mountain Coffee, Hansen Natural, Lululemon, Netflix, NetEase, Priceline,, Whole Foods, Wynn Resorts, YUM! Brands
• Index relative to S&P 500 also broke mid-Aug. support, suggesting market darlings poised to underperform: Roque
• “As ‘old timers’ often say, ’They have to come for the pretty girls before a good low is in place.’ Looks to us like they’re coming for these girls now

This is something to keep an eye on in the next few days and weeks. We’ve been saying over and over on this site that the overall market wouldn’t be able to find a bottom until Bank stocks found a bottom. But it is also possible in that scenario that some of the high flyers could lose their relative strength position as money rotates into more boring names.