The Dow Jones Industrial Average hit a new high Wednesday — its 33rd all-time high this year, according to The Wall Street Journal. The S&P 500 hit a new high as well, but profit-taking in small-cap and mid-cap stocks resulted in losses in the Nasdaq and Russell 2000.
The Dow gained 0.8% with 27 of its 30 stocks making gains, and 12 gained more than 1% for the day. Microsoft (MSFT) was the top performer, up 4.2%. Biotechnology stocks experienced sharp losses as the iShares Nasdaq Biotechnology (IBB) fell 2.9%. And Tesla Motors (TSLA) dropped 14.5% as management’s cautious guidance and lower Q3 deliveries took a toll on the stock’s price.
Economic data out of Europe was better than expected. And the Conference Board’s index of leading indicators increased 0.7%, which was slightly above estimates.
At Wednesday’s close, the Dow gained 129 points to 15,747, the S&P 500 gained 8 points at 1,770, and the Nasdaq fell 8 points to 3,932. The NYSE traded 705 million shares and the Nasdaq crossed 483 million. Advancers exceeded decliners on the Big Board by 1.2-to-1, and on the Nasdaq decliners were ahead by 1.1-to-1.
After eight weeks of attempting a new all-time high, the Dow industrials finally punched through the September top at 15,709, setting a new high at 15,750. Immediate support rests at 15,700, followed by the 20-day and 50-day moving averages at 15,468 and 15,283, respectively.
The Dow Jones Transportation Average made a new high as recently as last Monday, and so the new high by the industrials is a strong Dow Theory confirmation of a continuation of the bull market.
Conclusion: The Dow Theory is one of the oldest and most reliable of technical signals, so Wednesday’s new record by the industrials has special meaning. There seems little doubt that the strength of the industrials was supported by profit-taking in the biotech and technology sectors and broad selling in the Nasdaq and Russell 2000 indices.
The positive Dow signal is important, but perhaps it is even more significant that the blue chips finally awoke and attracted institutional interest. This completes a broad-based advance despite the temporary pullback of the higher P/E sectors. Broader breadth and higher-volume are both signs that the bull is alive and well.
The breakout of the industrials should be followed by a higher-volume advance if the trend is to continue. It is time to go after the better-quality stocks while profit-taking continues in the small- and mid-caps. But sharpen your pencils on buybacks of those stocks that are in retreat since they will probably be in the lead again.
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.