Despite a third triple-digit gain in as many days for the Dow industrials, the market ended Wednesday mixed. The Dow was up 0.9% while the Nasdaq fell 0.1% and the S&P 500 rose 0.3%.
The market opened weak due to the failure of Apple (AAPL) to put together a deal with China Mobile (CHL), a potential contract that had been rumored for weeks. And two new iPhone offerings were greeted with disappointment. Some said the “wow factor is missing.”
Utility stocks closed lower by 1.1%, but traders couldn’t explain why. This was especially odd on a day when Treasury bonds were strong and there were no adverse research reports.
At Wednesday’s close, the Dow Jones Industrial Average was up 136 points to 15,327 and the S&P 500 rose 5 points to 1,689, but the Nasdaq closed down 4 points at 3,725. The NYSE traded 657 million shares and the Nasdaq crossed 398 million. Advancers exceeded decliners on the Big Board by 1.5-to-1, but on the Nasdaq decliners led by 1.1-to-1.
Some longer-term income/growth-oriented investors may have concerns about Wednesday’s utility stock sell-off. But both the daily chart and the weekly chart of the index show that the sector is in a long-term bull market and is testing its bullish support line.
Since bullish support lines usually hold, this is probably a good time for those interested in a combination of relatively high dividend yields and growth to load up on some of these stocks. They may not provide the daily action that traders crave, but they have a history of solid returns. Note the 58% run in the last four years.
From a technical point of view, the real news Wednesday was the strength of the S&P 500. In two days, the S&P 500 has sliced through its 50-day moving average following a MACD buy signal.
As a result, the broad market must be considered very bullish since this key index is now well above its 20-day moving average and is moving up and away from its 50-day moving average.
Conclusion: All of the major indices now point higher, so anyone who attempts to trade against this trend will probably lose. Until now, traders had an even chance of making money on either side of the market. However, this week the momentum has shifted to the bulls, and so it is time for investors and traders alike to go with the trend despite your feelings of “how things should be.”
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.