The S&P 500 registered another new closing high Monday, but the gain was fractional and trading was narrow with light volume. The Dow Jones Industrial Average rose less than 0.1%, and the Nasdaq set another 13-year high, advancing 0.2%.
The reason for the sluggish trading is the uncertainty surrounding the Federal Reserve’s next move on its quantitative easing program. The upcoming Fed meeting is next Tuesday and Wednesday. Until then, investors will no doubt be subjected to a wide range of opinion on the governors’ next move, which currently range from cutting immediately, to January, or even later.
And hovering over D.C. are the budget negotiations that if unsuccessful could end with another shutdown. Those negotiations end this week.
At Monday’s close, the Dow Jones Industrial Average was up 5 points to 16,025, the S&P 500 gained 3 points at 1,808, and the Nasdaq rose 6 points to 4,069. The NYSE primary market volume was 695 million shares with total volume of 3.1 billion shares. The Nasdaq traded total volume of 1.7 billion shares. On the Big Board, advancers and decliners were even, and on the Nasdaq, decliners were ahead by 1.4-to-1.
Trading was so quiet Monday that someone said that they could hear the crickets chirping under the old floor of the NYSE. The VIX reflects the complacency that is accompanying the pre-holiday season. Despite the high degree of uncertainty, the current low VIX numbers are a positive sign indicating that there is no rush to sell.
Although the Nasdaq, which represents the mid-cap stocks, made a new high Monday, the small-cap Russell 2000 index stuttered. Its MACD sank into bearish territory. But support is close at hand at 1,123 and the 20-day moving average at 1,120. Beneath that level is the 50-day at 1,104. Positive news would most likely arch-up the red line of the MACD.
Some of the indices may be in a slumber, but the high techs — represented by the PowerShares QQQ (QQQ) — blasted to a new closing and intraday high again.
Conclusion: There may be concerns about the government’s action on two fronts, the Fed policy and budget negotiations, but investors are still buying into the technology stocks. And the U.S. growth projections still outstrip Europe and Asia, according to money managers recently interviewed by Jeff Saut of Raymond James. The short-term, intermediate-term and long-term trends are bullish for equities and very bearish for bonds. Thus, we will stick with stocks and ride the trend into the new 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.