On Friday, the higher-quality indices gained, but small- and mid-cap stocks fell after being under pressure for most of the week. The Dow Jones Industrial Average gained 0.5% and the S&P 500 rose 0.3%. However, the small-cap Russell 2000 fell 0.4%, and the mid-cap Nasdaq eked out a small gain.
Gold continued its downward slide with gold futures losing 0.7% and the Market Vectors Gold Miners ETF (GDX) falling 4.1%. But the Dow transports gained 1%, and strength in health care and industrials helped the S&P 500 post a modest gain.
At Friday’s close, the Dow gained 70 points at 15,616, the S&P 500 rose 5 points to 1,762, and the Nasdaq gained 2 points at 3,922. The NYSE traded 809 million shares and the Nasdaq crossed 510 million. Decliners exceeded advancers on the Big Board by 1.2-to-1, and on the Nasdaq, decliners were ahead by 1.4-to-1.
A last-minute rally saved the S&P 500 from closing at a minus, but it is struggling to maintain the recently won new high. MACD is hooking down, and though still bullish, the hook is not a positive sign. Trading support is at 1,756 to 1,759, but the more important intermediate support is at 1,710 to 1,730.
Even though the Dow just barely made a new high on Friday, it was stronger than the S&P 500 as institutions favored the blue chips. And its MACD, while bullish, is only turning slightly down.
Last week, the small-cap darlings of October were driven down by a run of profit-taking. The Russell 2000′s MACD has flashed a sell signal (short term), but the index found temporary support smack on its 20-day moving average at 1,095. The next support is at its 50-day moving average at 1,070, and then the support line of the bull channel at 1,050.
Conclusion: Despite Wednesday’s key reversal day on the Russell 2000, Nasdaq and S&P 500, much now depends on the higher-quality stocks of the Dow industrials and the NYSE Composite to turn back the bears.
During the first days of a new month, the market is usually flush with reinvestment cash from pension plans, and that’s probably why Friday’s volume increased. But if this “new money” fails to turn around October’s negative close, we could be in for some serious profit-taking and perhaps even a correction of 8% to 10%.
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.