Bulls May Get a Trick Rather Than a Treat This Halloween

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The Dow Jones Industrial Average led the market Thursday, pushed higher by strong earnings from Visa Inc (V), which jumped 10.2%.

A computer glitch midafternoon created an unwelcome pause in trading and confusion among traders. The Wall Street Journal reported that during the 10-minute trading halt, many backed away from the market.

Despite the turmoil created by the suspension, the Dow industrials had a triple-point day, up 1.3%, and the S&P 500 gained 0.6%. Since the Dow is a price-weighted average, Visa’s high price had an inordinate impact on the index’s advance.

Technology stocks, especially the chip sector, lagged as Intel Corporation (INTC) declined 4% and Atmel Corporation (ATML) fell 3.9% after issuing Q4 guidance that was below expectations.

Crude oil prices fell, driving energy stocks down. This was the only sector of the S&P 500 to register a negative close, with the Energy Select Sector SPDR (XLE) off 0.4%.

The Commerce Department said GDP rose at an annual rate of 3.5% in the third quarter. Analysts were expecting 3%.

Gold continued to slide with futures closing at $1,198.60 a troy ounce, down 2.2%.

At Thursday’s close, the Dow Jones Industrial Average gained 221 points at 17,195, the S&P 500 was up 12 points at 1,995, the Nasdaq added 17 points at 4,566, and the Russell 2000 gained 9 points at 1,156.

The NYSE traded total volume of 3.7 billion shares, and the Nasdaq crossed 2.2 billion. On the Big Board, decliners led advancers by 1.3-to-1, and on the Nasdaq, decliners led by 1.2-to-1.

VIX Chart
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The CBOE Volatility Index (VIX) has fallen over 50% from its mid-October high. Those who swear that the VIX is a solid indicator have scored points since the top was made at exactly the bottom of the major indices.

Now it is telling us that there is little in the way of put-hedging going on, so the market should continue to advance.

DJT Chart
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Chart Key

The chart of the Dow Jones Transportation Average is similar to those of the other leading indices, but for one exception: The transports fell Thursday while the others advanced.

The transports are accepted as an economic indicator, so what gives with this economically sensitive index?

Conclusion

As old Bill Shakespeare said, “Something is rotten in the state of Denmark.” The Danes may have a typically weak European economy, but that’s not our problem — at least according to the Fed.

However, with all of our indicators now overbought, I’d look for a Halloween “boo” that will scare the life out of the bulls.

According to the AAII Sentiment Survey, the bulls are hanging onto their optimism. For the second consecutive week, the bullish reading is over 49%, and it has increased for five consecutive weeks. Meanwhile, the bearishness has fallen to 21.07%, historically a very low reading. Since the AAII numbers are contrarian indicators, this is not good news for the bulls.

Again, it’s time to stand aside and hold some cash for a decline and then mid-November bounce.

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/2014/10/bulls-may-get-trick-rather-treat-halloween/.

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