On Thursday, the Dow industrials gave back a morning rally, closing with just a slight gain. The S&P 500 fell 0.1% on the day, and the Nasdaq was off 0.4%.
Tech and biotech led the way up in the morning and down in the afternoon. And by the end of the day, they had fallen into the all-too-familiar pattern of quality stocks up, smaller, high-risk stocks down.
In the only significant economic report of the day, initial jobless claims fell to 319,000 compared to expectations of 325,000.
At the close, the Dow Jones Industrial Average was up 32 points to 16,551, the S&P 500 fell 3 points to 1,876, and the Nasdaq lost 16 points at 4,052. The NYSE’s primary market traded less than 700 million shares with total volume of 3.4 million. The Nasdaq crossed 2.4 million shares. Decliners outpaced advancers by 1.4-to-1 on the Big Board and by 2.2-to-1 on the Nasdaq.
Selling continued on the Nasdaq, but volume is declining as the index approaches its 200-day moving average at 3,988. A break below this important line of support may determine the market’s direction for the remainder of the summer.
There is probably no better contrast between two markets than matching the Dow transports against the Nasdaq (except for maybe the Russell 2000). The transports just keep rolling along within an established bull channel, and the index hit another new intraday high on Thursday.
Conclusion: We saw some nibbling at the high-techs again Thursday, but the gains were short-lived. Nevertheless, buyers did appear. If the major indices, especially the Nasdaq and Russell 2000, can stabilize above current levels, a base could be established that might hold through the summer.
If the Russell 2000 (reviewed in the previous Daily Market Outlook) fails to regain its 200-day moving average and the Nasdaq penetrates its 200-day, then watch out.
Since the better-quality stocks are in a bull market, I’m inclined to believe that we will see a base near current levels on the two indices. But there is not enough technical evidence to support this thesis, so for now we should retain cash, buy only genuine bargains, and take the short side of the market with appropriate safeguards.
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.