Cash in Any Big Profits in Small Caps

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Stocks broke a three-session winning streak Tuesday. Although the S&P 500 set a new intraday high, the index closed lower, and the Dow Jones Industrial Average fell as well. Both indices were adversely impacted by a drop in oil prices. The Nasdaq closed up 0.1%, and the Russell 2000 fell 0.1%.

The Energy Select Sector SPDR (ETF) (XLE) fell 1.6% as crude oil futures slid 2.2% to settle at $74.09 a barrel.

Stocks opened higher due to a better-than-expected GDP revision. But the gains were short-lived thanks in part to a surprising drop in consumer confidence to 88.7 in November from a revised 94.1 in October. Economists had expected the index to rise to 96.5, and it instead fell to its lowest reading since June. And the present situation index, a gauge of consumers’ assessment of current economic conditions also fell.

Corporate profits showed a year-over-year increase for the twelfth straight quarter, and new data from the Federal Reserve Bank of New York indicated Americans are increasing their borrowing.

Overall it was a slow day of trading. At the close, the Dow Jones Industrial Average was off 3 points at 17,815, the S&P 500 fell 2 points to 2,067, the Nasdaq rose 3 points to 4,758, and the Russell 2000 fell 1 point to 1,186.

The NYSE’s primary market traded 829 million shares with total volume of 3.3 billion shares, and the Nasdaq crossed 1.6 billion. On the Big Board, advancers outpaced decliners by 1.2-to-1, and on the Nasdaq, there were slightly more decliners than advancers.

S&P 500 Chart
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Chart Key

The S&P 500 backed away from a new closing high and its upper Bollinger Band. It flashed a sell signal from my proprietary indicator, the Collins-Bollinger Reversal (CBR). MACD is flat; however, a closer look shows that the fast line (red) has a slight curl up, which is a positive.

Russell 2000 Chart
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The Russell 2000 fell back from the resistance line at 1,187, but like the S&P 500, its MACD fast line is turning up. Its death cross is still active, and the double-top at 1,213 in March and July is still the major barrier to an advance.

Conclusion

Even though slow trading was blamed on the holiday week, a powerful bull surge will sometimes ignore shortened weeks. Thus, I remain very cautious with regard to “predicting” a further breakout. As pointed out in the Daily Market Outlook on Tuesday, there is stubborn resistance at 1,184 to 1,187 on the Russell 2000. Ignore it at your own risk.

Some new readers may interpret my comments as bearish or bullish (depending on their own opinions and fears). Despite that, I have repeatedly stated my overall long-term bullish stance.

However, since the Daily Market Outlook is geared toward traders, I attempt to identify support and resistance lines and zones from which they may gain a trading advantage. The Russell 2000 is approaching one of those resistance lines at 1,187. Taking a long position at this time would be overly aggressive since resistance lines offer a good place to cash in profits.

It is now time to cautiously review your holdings and cash in any big profits. The market doesn’t go up forever, and neither do stocks of the Russell 2000.

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/2014/11/daily-market-outlook-cash-big-profits-small-caps/.

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