On Friday, the two most-watched indices, the Dow industrials and S&P 500, rose modestly to new record closes. The buying was fueled by U.S. jobs data. The addition of 214,000 jobs in October was shy of expectations of 235,000, but the shortfall gave investors hope that the Federal Reserve would not raise interest rates sooner than expected. The unemployment rate fell to 5.8%, a six-year low.
Crude oil rose 1% to $78.71 a barrel on a weaker U.S. dollar. Gold rose as well, with the Market Vectors Gold Miners ETF (GDX) up 8.3%. Gold futures gained 0.4% to $1,146.80 an ounce.
Walt Disney Co (DIS) fell 2.2% despite announcing an 8% increase in quarterly profits. Abercrombie & Fitch Co. (ANF) was down 16.6% after reporting a 12% sales decline in Q3.
Tech and biotech stocks put in a poor showing. The iShares PHLX SOX Semiconductor Sector (SOXX) fell 0.9%, and iShares NASDAQ Biotechnology Index ETF (IBB) lost 1.1%.
At Friday’s close, the Dow Jones Industrial Average gained 19 points at 17,574, the S&P 500 rose less than a point to 2,032, the Nasdaq fell 6 points to 4,633, and the Russell 2000 gained 1 point at 1,173.
The NYSE’s primary market traded 773 million shares with total volume of 3.4 billion. The Nasdaq crossed a total of 1.9 billion shares. On the Big Board, advancers outpaced decliners by 1.6-to-1, but on the Nasdaq, the number of decliners was slightly ahead of advancers.
For the week, the Dow rose 1.1%, the S&P 500 gained 0.7%, and the Nasdaq and Russell 2000 broke even.
Despite breaking through its old closing high from Sept. 19 at 2,010, it is difficult to imagine a less enthusiastic follow-through. MACD is falling, as is momentum. Initial support is at the breakout of 2,010, and then the 50-day moving average at 1,971.
The Dow’s chart appears more enthusiastic than the S&P 500’s. But it too is overextended with MACD very overbought. On Friday, we had another new high but with a mere 0.01% gain. First support is at the June support line at 17,150, and then its 50-day moving average at 16,953.
Like the S&P 500, the Dow’s momentum was high but is falling, which is an indication of a lack of enthusiasm.
Conclusion
It is difficult to maintain a highly bullish stance even as the big caps make new highs. Perhaps they will continue to move ahead since price trumps everything. However, the S&P 500 is now trading at about 18 times earnings. This compares to the October low at a P/E of about 15.5.
One of the most astute market traders I know said, “Stocks that make new highs will continue to make new highs.” Perhaps so, but not all at once and not in a straight line up.
We are due for a mild pullback to at least the first line of support at 2,010 on the S&P 500 and 17,150 on the Dow.
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.
