Stocks opened higher on Monday following the three-day holiday during which President Obama decided to take his proposal for military action on Syria to Congress. But when both Speaker of the House John Boehner and Senate Majority Leader Harry Reid backed the president’s plan, stocks turned lower.
The focus of trading was clearly on the Syrian issue; however, both Microsoft (MSFT) and Verizon Communications (VZ) fell sharply following announcements of major acquisitions. Mr. Softie was off 4.6% and Verizon fell 2.9%.
Also in reaction to the Syrian crisis, crude oil rose 0.8% to $108.55 a barrel. Gold futures rose 1.2% and silver futures jumped 3.4%.
At Tuesday’s close, the Dow Jones Industrial Average was up 24 points at 14,834, the S&P 500 rose 7 points to 1,640, and the Nasdaq jumped 23 points at 3,613. The NYSE traded 787 million shares and the Nasdaq crossed 429 million. Advancers led decliners on the Big Board by 1.3-to-1 and advancers were ahead on the Nasdaq by 1.8-to-1.
The Dow is the weakest of all charts with a breakdown from its 50-day moving average and limp response for five days at the crucial support line at 14,760. A break there would almost certainly result in a fall to its main support at 14,445 — its 200-day moving average.
Note the bearish crossover of the 20-day moving average through the 50-day, a short-term sell signal, which is supported by the tepid response from MACD. MACD is telling us that the Dow is oversold but that it could become even more oversold.
Conclusion: The market is teetering on the brink of falling through major support lines and zones. The only reason that it held Tuesday was the president’s decision not to immediately bomb Syria but to take the decision to Congress. But with the G-20 meeting in Moscow coming up later this week, it seems unlikely that any action on Syria will take place before then.
Apparently, the only hope for stocks to trade sideways in September is for the politicians to take no action but do a lot of jawboning. But it will take more than jawboning to hold prices where they are in what has historically been the worst performing month of the year.
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.