Kick the Dogs Out of Your Portfolio Now!

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The S&P 500 broke to a new high on Monday but closed just short of the psychologically important 2,000 level. But its intraday high at 2,001.95 put this most-watched index firmly into new high ground with all 10 sectors in the black.

There was little in the way of news to push stocks ahead, so investors had to be satisfied with last week’s remarks by Federal Reserve Chief Janet Yellen who suggested that a hike in interest rates is still some months away. European Central Bank (ECB) President Mario Draghi had suggested a willingness for more aggressive stimulus, and that also likely gave the markets a lift.

In corporate news, Swiss drug maker Roche (RHHBY) agreed to acquire InterMune (ITMN) for a 38% premium to Friday’s close. This alone had an impact on the iShares Nasdaq Biotechnology (IBB), which rose 2.3%. Goldman Sachs (GS) reached a settlement agreement with the Federal Housing Finance Agency (FHFA) over old claims for mortgage-backed securities.

July new home sales fell 2.4% from June versus an expected rise of 4.7%.

At Monday’s close, the Dow Jones Industrial Average rose 76 points to 17,077, the S&P 500 gained 10 points at 1,998, the Nasdaq was up 19 points to 4,557, and the Russell 2000 gained 5 points at 1,165. The NYSE’s primary market traded just 494 million shares (the lowest of the year) with total volume of 2.2 billion shares. The Nasdaq crossed 1.4 billion shares. On both exchanges, advances outpaced decliners by about 1.6-to-1.

SPX Chart
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Chart Key

The S&P 500 finally resolved the bullish “V” formation with a thrust to new highs. This, coupled with a strong MACD, confirms the strength of the breakout. Support on pullbacks should be limited to the zone of 1,955 to 2,000, with the 50-day moving average at 1,962 also a solid support number.

Conclusion

The U.S. stock market’s technical appraisal is bullish — expect higher prices. The resolution of the bullish “V” signifies an important reversal with a trading target of approximately 2,090.

Some will claim that the light volume, indeed the lowest volume of the year, indicates that the breakout is less meaningful, and they could be correct. I would feel much better with a break accompanied by a 10-million-share day on the NYSE. But we must work with what we have, and what we have is not bad.

The Nasdaq sustained a break to a 14-year high, the Dow has risen to within striking distance of a new high, along with accompanying strength from the Dow transports, and the lagging Russell 2000 closed decisively above its 50-day moving average. So let’s rejoice and be happy, and most importantly, hold onto your winners and sell those stocks that have not participated in this advance since they must surely be dogs.

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.


Article printed from InvestorPlace Media, https://investorplace.com/2014/08/daily-stock-market-news-kick-dogs-portfolio-now/.

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