Thursday was a low-volume but choppy session, and the major exchanges ended on a mixed note.
Defensive sectors led as technology and consumer stocks failed to make much headway. Most gains were confined to utilities (+0.6%), health care (+0.7%) and consumer staples (+0.4%). Transportation stocks did well (+0.95%). Technology stocks including Apple (AAPL), Cisco (CSCO) and Google (GOOG) lost ground.
New unemployment claims fell by 15,000 to 330,000, which was more than expected. December nonfarm payrolls will be released at 8:30 EST this morning.
At Thursday’s close, the Dow Jones Industrial Average lost 18 points at 16,445, the S&P 500 had a slight gain at 1,838, and the Nasdaq fell 9 points to 4,156. The NYSE traded total volume of 3.5 billion shares, and the Nasdaq crossed 2.2 billion. There were slightly more advancers than decliners on the Big Board, but more decliners than advancers on the Nasdaq.
The string of eight sessions of lower highs and lower lows has formed a bullish flag. And since flags usually break in the opposite direction of their pattern, we should expect new highs shortly. MACD, however, is not cooperating and posted a sell signal Thursday.
The most surprising technical feature of Thursday’s trade, which so far has gone unnoticed by other technicians, was the pop in the Dow transports. After lagging for days and testing its 20-day moving average, the Dow Jones Transportation Average jumped from support and almost broke to a new closing high. Its MACD flashed a buy signal.
Conclusion: Two weeks ago, I warned that a Dow Theory non-confirmation was possible because of a lagging Dow transportation index. Since then, the transports, which are closely watched by those who believe it has predictive economic value, broke to a new high and had a strong showing Thursday. This is a good indication that the bull is still on the field but taking a breather.
Despite the strong performance of the transports, the “elephant in the room,” as one analyst put it, is that the major stock indices are lower after the year’s first five sessions. This is considered a bad omen; however, the powerful performance of stocks in December and the delayed selling of profitable positions in the new year may have so far slowed progress. Mr. Market will shortly indicate the direction of the next move. But more patience is required.
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.