The stock market indexes pared or erased losses in late trading Tuesday, but leading stocks performed much worse as some of this year's winners continued to fall out of favor.
XIndexes closed at session highs. The Nasdaq composite was down as much as 1% but closed down only a fraction. The composite ended slightly above its 50-day moving average. The S&P 500 edged up a fraction and the Dow Jones Industrial Average rose 0.3% to stretch its win streak to five days. Volume rose from Monday's totals, according to early data.
Small caps are emerging as a new force in the market. The Russell 2000 rose 1.1%, adding to Monday's 1.3% rally.
Besides small caps, investors also are liking value stocks over growth. The SPDR Portfolio S&P 500 Growth ETF (SPYG) fell 0.6% while the SPDR Portfolio S&P 500 Value ETF (SPYV) rose 0.6%. The SPDR growth ETF fell below the 50-day moving average, while the S&P 500 value ETF is closing in on a 32.30 buy point.
Cyclicals such as energy, transportation and materials led the market for a second consecutive day. Retail was the best sector, as SPDR S&P Retail ETF (XRT) jumped 2.8%. Department stores, furniture and specialty retail were groups with gains of more than 2% Tuesday.
Air Lease (AL) rose above the 43.14 buy point of a large cup with handle base in volume more than 30% above average. O'Reilly Automotive (ORLY) rose above the 407.30 buy point of a flat base. Volume was mediocre, but it was the latest in a series of bullish moves in auto parts and dealership stocks.
Financials also continued to improve. Legg Mason (LM) broke out of a flat base in regular volume. JPMorgan (JPM) tried to clear a cup base with a 117.34 buy point but closed below that entry.
The Innovator IBD 50 ETF (FFTY) tumbled for a second day in a row, down 2.9% on Tuesday. The IBD 50 vastly underperformed and is now at the lowest level since early June. Of the 50 stocks, 18 slid more than 3% and losses reached as high as 10%.
Universal Display (OLED), a leader in video technology, lost 9.9% in heavy volume. The stock triggered sell signals when it plunged below the 50-day moving average and fell more than 8% from its 218.38 buy point.
The rout in cloud software continued with heavy losses in Paycom (PAYC), HubSpot (HUBS) and Atlassian (TEAM). It wasn't just technology leaders getting hit. Heico (HEI) fell further below its 50-day line. Its two-day plunge has resulted in a sell signal.
CDW (CDW), a technology equipment distributor, fell below its 50-day average but continues to work on a flat base. PagSeguro Digital closed below its 50-day line for the first time since May, when the Brazilian payment processing firm was forming a base.
Advancing stocks led decliners by a 9-to-7 ratio on the NYSE and by 12-to-7 on the Nasdaq. The breadth is a sign that the selling is concentrated among leading growth stocks.
Juan Carlos Arancibia is the Markets Editor of IBD and oversees our market coverage. Follow him at @IBD_jarancibia
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