On Wednesday, the S&P 500 hit another new record close, and the Dow Jones Industrial Average hit a new intraday high. The Dow, however, could not hold onto the new high and retreated on the close, but still gained 0.2% for the day. For the broad-based S&P 500, it was the eighth new closing high of the year.
The market started strong following the ADP National Employment Report for March, which was just shy of forecasts, but showed the strongest job growth in three months. Factory orders were stronger than expected, and that brought in a slow stream of buyers.
At the close, the Dow Jones Industrial Average gained 40 points at 16,573, the S&P 500 rose 5 points to 1,891, and the Nasdaq was up 8 points at 4,276. The NYSE’s primary market traded just 640 million shares with total volume of 3.1 billion shares. The Nasdaq crossed 2.2 billion shares. Advancers edged out decliners on both exchanges by about 1.3-to-1.
The S&P 500 took one giant step for the market by again breaking to a new high. Even though volume was relatively light, the breakout was accompanied by a strong MACD buy signal. And the move higher was launched from a solid platform that took over a month to construct.
The Dow Jones Transportation Average’s chart is a beautiful illustration of a bull market in action. Here we see a classic double-top breakout from a deep cup and, just for a finale, a break from a bullish flag accompanied by a powerful new MACD buy signal.
Conclusion: Despite the low volume and mediocre breadth, the stock market is in the process of telling us that prices are headed higher, perhaps even much higher. Although the Dow industrials failed to close at a new high and trigger a Dow Theory buy signal, it really doesn’t matter. The most important Dow index, the Dow Jones Transportation Average, broke out with flags flying. It is the only index that is considered an economic indicator because of its ability to predict industrial activity with a high degree of accuracy.
The market has again overcome the naysayers and climbed an enormous “wall of worry,” which unfortunately, has left the public behind. And it is likely that at current “stratospheric levels,” as one wag put it, the average Joe will still hold cash and bemoan the unfairness of a “manipulated market.”
But for those who have the nerve to follow the technical indicators, it is not too late to invest.
On Wednesday, Dorsey Wright (point-and-figure gurus) highlighted the biotech sector as ripe for bargain hunting, pointing out that the recent correction and bearish signal that began after it peaked in February have been reversed. They refer specifically to the First Trust NYSE Arca Biotech Index (FBT).
The market speaks, but only to those who will listen.
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.