Why Today’s Price Action Is So Important

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On Friday, the major indices, including the Dow, S&P 500 and Nasdaq, broke a string of five weekly gains, closing modestly lower under pricing pressure for crude oil and its residual impact on the economy.

And geopolitical concerns continued to make investors more cautious. Added to that was talk that the Federal Reserve may decide to raise interest rates sooner than expected. Its two-day policy-making meeting will conclude on Wednesday.

Typically defensive sectors scored no better than aggressive sectors. Consumer staples, biotech and financial stocks were lower, along with telecom and utility stocks, which were hurt by a weak bond market. The 10-year U.S. Treasury note fell, bringing the yield up to 2.61%. The U.S. REIT index dropped 3%.

Retail sales increased, matching analysts’ estimates. The University of Michigan Consumer Sentiment Index rose slightly more than expected to its highest reading since July 2013.

Crude oil futures fell 0.6% to $92.27 a barrel, and gold fell 0.6% to $1,231 a troy ounce.

At Friday’s close, the Dow Jones Industrial Average fell 61 points to 16,988, the S&P 500 lost 12 points at 1,986, the Nasdaq fell 24 points to 4,568, and the Russell 2000 was off 12 points at 1,161. The NYSE primary market traded 694 million shares with total volume of 3.2 billion shares, and the Nasdaq crossed 1.8 billion shares. On the Big Board, decliners outpaced advancers by 3.8-to-1, and on the Nasdaq, decliners led by 2.1-to-1.

For the week, the Dow fell 0.9%, the S&P 500 lost 1.1 %, the Nasdaq declined 0.3%, and the Russell 2000 fell 0.8%.

SPX Chart
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Chart Key

Some technicians would say that the S&P 500’s 50-day moving average at 1,973 is critical and must hold in order to maintain an intermediate uptrend. But I would say that the failure to hold at the July breakout at 1,991 is equally important. And one of our most reliable indicators, the MACD, is now bearish, which is not a good sign. This illustrates the importance of price action being confirmed by internal indicators.

Dow Chart
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The Dow’s price is holding above the support line at 16,970, but by just 17 to 18 points. And on Friday, MACD flashed a sell signal.

I’ve already discussed the Dow non-confirmation when evaluating the Dow transports chart. The implications of a further breakdown of the industrial average could cause a negative run that could last until late October.

Conclusion

The critical end of third-quarter triple witching will occur this Friday, and according to the Stock Trader’s Almanac, you should not be long the week following it. The Almanac reports that since 1991 only five of those weeks ended up and 17 were down. And in 2012, that week ended with a Dow loss of 737.61 points.

As the market trades around some important inflection points, there is another statistic that is important — the Friday down/Monday down warning. We have already had a down day on Friday, and it occurred close to critical inflection points on virtually every index.

A down day today that breaks those points could result in an intermediate downturn with resulting high negative volatility. On the other hand, a plus close today could result in a plus week terminating with a buying climax on Friday.

However, since a minus day today could be a warning of a negative future course of stocks for weeks to come, it is time to be very, very cautious.

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-todays-price-action-important/.

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