U.S. stocks closed mixed Thursday, but some key indices reversed up even in the face of broad selling in Asia and Europe. The Japanese Nikkei 225 fell 2.6%, and the Stoxx Europe 600 index lost 2.4%.
The European Central Bank (ECB) failed to provide details on plans to stimulate Europe’s economy, while there had been an expectation that it would embark on a bond-buying program.
Following the closing of Europe’s markets, U.S. markets began to rally from their lows, helped by economic news. The number of filings for weekly unemployment benefits fell more than expected. However, U.S. factory orders in August fell slightly more than expected.
The yield on the 10-year Treasury note rose to 2.436% from 2.434% Wednesday, which was the lowest level in more than a month. Oil prices rose above $90 a barrel to settle at $91.01.
At Thursday’s close, the Dow Jones Industrial Average fell 4 points to 16,801, the S&P 500 was flat at 1,946, the Nasdaq rose 8 points at 4,430, and the Russell 2000 gained 11 points at 1,096.
The NYSE traded total volume of over 4 billion shares, and the Nasdaq crossed 2.1 billion shares. On the Big Board, advancers barely outpaced decliners by 1.1-to-1, but on the Nasdaq, advancers led by 1.8-to-1.
On Wednesday, I voiced concern over the decline in the Dow Jones Transportation Average, but noted that it had pierced its 50-day moving average three times this year and reversed from it. Thursday marks the fourth such reversal from that important line.
I also provided a chart of the Russell 2000 Wednesday and noted that its low curiously corresponded with the lows of February and May at 1,083. On Thursday, the low was pierced, but that was quickly followed by an impressive rally and short-term buy signal from my proprietary indicator, the Collins-Bollinger Reversal (CBR). A continuation rally to the gap at 1,101 to 1,105 is the first objective.
Conclusion
The CBR indicator actually registered buy signals on all major indices Thursday, except the defensive Dow utilities.
It was encouraging to have the small caps of the Russell 2000, sometimes referred to as the “soldiers,” lead the charge. However, there are still serious obstacles to overcome.
The first is the gap at 1,101 to 1,105. Then there is a thick area of resistance spanning from about 1,105 to 1,125. Unless there is a big-volume push, it could take some time to overcome this resistance before the initial major objective of a Fibonacci 50% retracement of the June high to Wednesday’s low is achieved.
But that’s enough to rejoice about this morning. Let’s hope that the week ends on a rally rather than a new low, which would cancel my optimism and set the stage for a further decline.
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.
