On Wednesday, stocks slipped in the final hour of trading after holding an advance for most of the day. Trading was relatively light, and it appeared that traders booked profits during the final hour ahead of a flurry of economic reports due today and Friday.
Toll Brothers (TOL) rose 2.1% on positive earnings. And transportation stocks were again the focus of buyers, with the Dow Jones Transportation Average up 0.7%.
Q1 gross domestic product (GDP) will be released at 8:30 a.m. Economists expect it to decline to a seasonally adjusted rate of 0.6%. And April pending home sales will be announced at 10 a.m.
At Wednesday’s close, the Dow Jones Industrial Average was down 42 points to 16,633, the S&P 500 fell 2 points to 1,910, and the Nasdaq dropped 12 points to 4,225. The NYSE’s primary market traded about 600 million shares with total volume of 3 billion.
The iShares Russell 2000 (IWM) clearly shows a break through the bearish resistance line, which intersected with the 200-day moving average around $111. The gap created on the break is from $112.02 to $112.65.
Gaps of this nature are often closed, so don’t be discouraged if the Russell has a day or so of profit-taking before resuming its journey north. Volume fell on Wednesday’s slight pullback, and MACD is very bullish.
This very bullish chart of the SPDR S&P 500 (SPY) shows a clear break from the neckline ($189) of an inverse head-and-shoulders formation. Since the head’s low is at $181 and the neckline is at 1$89, a difference of 8 points, it is easy to calculate a target of $197.
Conclusion: These ETFs illustrate the identical patterns of the major indices they represent and provide a means for the average investor to buy into the indices, which under the current bullish circumstances should be a buy-and-hold strategy.
Wednesday’s round of low-volume profit-taking is normal. Technically, the overall market has successfully completed a series of rotational buying, which has finally turned the small- and mid-cap stocks up after weeks of struggling.
The bull has taken charge again, but the pace has not quickened due to a lack of participation from the public. A recent poll by CNBC revealed that most small investors are not only out of the market but don’t even follow its progress. If that is true, and barring a negative surprise, stocks should continue their steady march north.
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.