On Friday, trading was flat until a late rally drove the S&P 500 to its March 1 closing high on what the NYSE said was an “imbalance of shares.” This marked the longest streak of gains (six) since December 2010. Telecommunications and industrial stocks led the way higher, and a strengthening euro added to the late rally.
At Friday’s close, the Dow Jones Industrial Average rose 43 points to 13,208, the S&P 500 gained 3 points at 1,406, and the Nasdaq added 2 points at 3,021. The NYSE traded 565 million shares and the Nasdaq crossed 371 million. Advancers led decliners on the Big Board by 1.2-to-1, and on the Nasdaq decliners were ahead by 1.25-to-1.
For the week, the Dow gained 0.9%, the S&P 500 was up 1.1%, and the Nasdaq rose 1.8%.
The S&P 500 closed exactly at its May 1 high of 1,406 on a late-day rush of light buying. Note that despite the advance momentum is declining and very close to going negative. Friday’s close was also very near to the top of the bullish resistance line at about 1,410.
While the S&P 500 is pushing its bullish resistance, the CBOE Volatility Index (VIX) is very complacent at 14.74. This, like the low volume and tepid breadth, looks very much like the picture drawn in March just prior to the plunge from 1,406 to 1,278.
Conclusion: Strictly from a chart viewpoint, the pattern of a bull channel is constructive, especially as it approaches new highs. However, in over four decades of studying technical analysis, I don’t remember ever seeing a major breakout that was accompanied by such lethargy as expressed by volume and breadth. In other words, what is occurring is “not a conventional setup for a multi-year breakout,” according to MarketWatch’s Michael Ashbaugh.
With the quarterly earnings reports now almost complete, the markets are in the hands of Europe’s economic gurus and our own Fed, which is reluctant to take further stimulative action at this time.
Additionally, August is historically one of the worst performing months of the year, and so I caution new investors and traders against new positions while longer-term investors should hold tight.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.