The foreign markets were hit hard as a result of the Bank of Japan’s (BOJ) failure to introduce new measures to ease volatility. They, like the Federal Reserve, cite signs of economic recovery, and investors interpreted this to mean that bond prices will continue to fall as yields rise. Both bonds and stocks were sold and the Japanese yen rose.
A late bond rally in the United States resulted in the 10-year yield falling by 3 basis points to 2.182%. Its intraday high was 2.29%.
The highly volatile session ended with the Dow Jones Industrial Average down 117 points to 15,122, the S&P 500 fell 17 points to 1,626, and the Nasdaq lost 37 to closed at 3,437. The NYSE traded 688 million shares and the Nasdaq crossed 378 million. Decliners outpaced advancers on the Big Board by 5.4-to-1, on the Nasdaq, decliners were ahead by 2.8-to-1.
Since the NYSE Composite Index is composed of all of the stocks traded on the Big Board, it often provides special insight. While the other indices have been focused on higher volatility and, thus, have had bigger intraday swings, the NYSE has plodded along, holding to the bullish intermediate trendline.
It, like the other major indices, triggered a Collins-Bollinger Reversal (CBR) buy signal on June 6, but the index failed to result in a penetration of the 20-day moving average. On Tuesday, the index closed below its 50-day moving average. But since February, it has closed under the 50-day three times and then rallied. Both its RSI and MACD are oversold.
Conclusion: The intermediate trend of the NYSE Composite is up, with support at about 9,200. However, unlike the other indices, the near-term trend is down. In order to reverse the near-term trend, it must close above 9,400, and chances are strong that will occur.
The overreaction to Japan’s bond markets caused a late-session rally in bonds, and that could cause a bounce back in the equity markets today. Traders should refer to the charts of the major indices that we published on Monday for key support/resistance zones. Investors should use weakness to establish new positions. The bull is sleepy but still moving ahead.
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.