Friday was a quiet day on the exchanges, but modest advances capped the biggest weekly gain in more than eight months. The gain of just one week erased all of August’s losses as the market moved higher in advance of the Fed’s FOMC meeting.
Despite the market gains, retail sales rose 0.2% in August, which was less than expected. And, according to the University of Michigan’s consumer sentiment index, consumers are feeling less optimistic than in August.
At Friday’s close, the Dow Jones Industrial Average was up 75 points at 15,376, the S&P 500 rose 5 points to 1,688, and the Nasdaq gained 6 points at 3,722. The NYSE traded 564 million shares and the Nasdaq crossed 320 million. Advancers led decliners on both major exchanges by about 1.6-to-1.
The broad-based S&P 500 has reclaimed the initiative with a full week of closes above its 50-day moving average. The first support now rests at 1,676, and then the 50-day moving average at 1,673. It is trading in a resistance zone that tops at the July high of 1,708. Note the MACD buy signal.
The Dow industrials regained the high ground last week, too. The Dow put together a series of closes above its 50-day moving average, also with a MACD buy in force.
However gold, as represented by the SPDR Gold Shares (GLD), was crushed last week. It appeared that the metal was forming a double-top, but that buyers had an opportunity to mount a successful rush against it.
But on Thursday, the futures took a severe blow when a single trader placed an order to sell 2,000 December contracts “at the market.” The contract plunged when bargain hunters failed to show up, and the metal closed down $44 an ounce at $1,321.
GLD recovered slightly on Friday, but the damage was done. Look for lower prices in precious metals.
Conclusion: As noted in Friday’s Daily Market Outlook, it is apparent that the long-awaited “correction” was no more than a less-than-5% pullback — pretty puny by historical standards.
The small-cap and mid-cap stocks have taken the lead, but today’s charts show that the big indices picked up momentum last week and are likely to break through their July highs.
That should not lead either traders or investors to venture into high P/E stocks or those that are trading more than 30% above their 200-day moving averages. No one is “guaranteeing success,” even with such a favorable technical picture before us.
Finally, the AAII Sentiment Survey for Sept.12 indicates that the public’s market sentiment is turning bullish. Bullish sentiment rose to 45.5%, which is the highest reading since July 11 at 48.9%. Since this is a contra-indicator, it also cautions against wild speculation at current levels.
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.