After The Bubbly

Market News: Cognizant Technology, Red Hat, Restoration Hardware

Over the last two weeks, stocks have shown a tendency to rise early in the morning (helped by a ramp in futures trading just before the opening bell), chop around midday and slide lower into the close. This behavior has been seen most clearly seen in the Dow Jones industrial average, whereas smaller indices such as the Russell 2000 and Nasdaq Composite have been markedly weaker. Hit by recent selloffs in tech momentum favorites like Twitter ( TWTR ) and Amazon ( AMZN ), as well as biotech stocks, these indices have scythed beneath their 50-day moving averages in the most significant pullbacks since the January dive on emerging market fears. That's worrisome because these are better, broader representations of the health of the overall stock market. Digging deeper, there is growing evidence that the market's ups and downs are masking some serious selling pressure beneath the surface -- selling pressure that has already, by one measure, threatened to end the stock market rally that started in late 2012. Both the Nasdaq and Russell 2000 have largely stayed above their respective 20-week moving averages over this time.

The Dow Jones Industrial Average (DJIA) rose 0.36%, the S&P 500 went up 0.46% while the Nasdaq climbed 0.11% on Friday. According to Bloomberg, the shares of corporations in the consumer discretionary sector increased 0.6% as economic data indicated that household spending climbed to the highest level in February. In a telephone interview, Chris Gaffney, senior market strategist at EverBank Financial told Bloomberg, If consumers go back in and are confident enough to start spending again; that supports earnings and will certainly support the equity market. I feel like were forming a base that we can move high now. On the other hand, Eric Marshall, portfolio manager at Hodges Funds noted that the stock markets are showing a healthy sign. He said, Were seeing a little bit of a recoil rally after the profit taking over the past couple weeks. Weve seen some sector rotation more to the quality names. Thats a healthy sign. U.S.