After lagging for most of the year, technology stocks led the market to a modest advance Monday with Microsoft (NASDAQ:MSFT) gaining 3.6%, Apple (NASDAQ:AAPL) up 2.1%, and Intel (NASDAQ:INTC) up 2%. Friday’s gains coupled with Monday’s advance helped offset much of last week’s losses.
At Monday’s close, the Dow Jones Industrial Average was up 20 points to 14,567, the S&P 500 gained 7 points at 1,563, and the Nasdaq rose 27 points to 3,234. The NYSE traded 620 million shares and the Nasdaq crossed 445 million. On the Big Board, advancers led decliners by 1.5-to-1, but on the Nasdaq, advancers were ahead by just 1.1-to-1.
Even following a nasty week with two days when down volume exceeded up volume by 7-to-1, the S&P 500’s uptrend is still intact. But damage has been done: The bull channel that began in November was broken; the 20-day moving average was pierced; and the support at 1,575 was turned into a resistance line as a result of its penetration. In addition, MACD issued a sell signal at the beginning of last week.
However, this week’s price action has thus far halted the decline at the support line at 1,540 and the 50-day moving average at 1,545. And MACD appears to be hooking up, indicating that the rally could continue despite a lack of breadth (advancers versus decliners) and low volume seen on both Monday and Friday.
Conclusion: Last week’s bearish price action was caused primarily by the tragic events in Boston, but that doesn’t mean that the possibility of a change in trend should be dismissed. Price action always trumps everything else, and the price action is lethargic at best.
A break through the S&P 500’s support at 1,545 to 1,540 would confirm a change in trend with the next meaningful support just below at 1,500. Thus, in the absence of a solid rally with breadth of at least 3-to-1 and volume over 800 million shares (NYSE) that drives through the resistance line at 1,575, I remain solidly on the sidelines.
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.