Buy Into Weakness If Profit-Taking Continues

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Despite expectations of a strong September opening, stocks were mixed to lower on Tuesday.

Some blamed the slow start on the geopolitical situation, and others said that profit-taking following a strong August performance was the reason for the weakness. But stocks are still very close to their highs, and every “panic sell-off” has resulted in buyers taking up the slack.

The energy sector took a solid hit, off 1.3%, with oil and gas futures down sharply. Exxon Mobil (XOM) and Chevron (CVX) were two of the worst-performing Dow stocks. But economists agree that lower fuel prices have a long-term positive impact on the economy.

The Institute of Supply Management’s purchasing managers index (PMI) rose to 59 in August, its highest level since March 2011. A reading of 56.8 was expected.

The U.S. dollar climbed sharply against other major currencies, hitting an 11-month high at $1.31 against the euro. The British pound fell to a six-month low at $1.647.

At Tuesday’s close, the Dow Jones Industrial Average was down 31 points at 17,068, the S&P 500 fell 1 point to 2,002, the Nasdaq gained 18 points at 4,598, and the Russell 2000 rose 5 points to 1,179. The NYSE traded total volume of 2.8 billion shares and the Nasdaq crossed 1.9 billion shares. On the Big Board, there were slightly more decliners than advancers, but on the Nasdaq, advancers led by 1.5-to-1.

SPX Chart
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Nasdaq Chart
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Chart Key

Both the S&P 500 and Nasdaq have broken to new highs from classic bullish “V” formations, one of the most reliable of all technical tools. The Nasdaq has reached its highest level since March 2000.

Even the most ardent bear must admit to the powerful bull trend that these charts represent.

Conclusion

The near-term target is 2,100 for the S&P 500 and 4,700 for the Nasdaq. The only lagging index, in the sense that it has yet to break to a new high, is the Dow (see Aug. 27 chart). But it too is supported by a bullish “V,” so I believe it is only a matter of time before the senior index pops to a new high.

Even though historically the day following Labor Day is usually an up day (13 of the past 19 years), this one was mixed with mild profit-taking. And following one of the strongest Augusts on record, we might see a few more days of it before the uptrend resumes. With that in mind, continue to buy into weakness.

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/2014/09/daily-stock-market-news-buy-weakness-2/.

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