Stocks forged ahead Monday, led by the formerly lagging small caps as the Russell 2000 rose 0.5%. The S&P 500 gained 0.3% while the Dow rose 0.2%, with both indices making new record highs.
With Q3 earnings mostly reported, the focus will likely turn to Federal Reserve policy. However, geopolitical strife could negatively impact the market with Russia conducting aerial maneuvers around Europe on a larger scale.
But with growth lagging in Europe and slowing in China, the U.S. economy may be the best of the bunch.
Crude oil fell 1.6% to $77.40 a barrel, which is down 28% from its late June high. The decline has hurt energy stocks, but should help other industries like retail and transportation.
Gold futures fell 0.9% to $1,159.60 a troy ounce.
Homebuilder Toll Brothers Inc (TOL) rose 2.3% after reporting stronger-than-expected preliminary Q4 sales.
At Monday’s close, the Dow Jones Industrial Average gained 40 points at 17,614, the S&P 500 rose 6 points to 2,038, the Nasdaq gained 19 points at 4,652, and the Russell 2000 was up 6 points to 1,180.
The NYSE’s primary market traded 717 million shares with total volume of 3.2 billion. The Nasdaq crossed 1.8 billion shares. On the Big Board, advancers outpaced decliners by 1.3-to-1, and on the Nasdaq, advancers were ahead by 1.6-to-1. Block trades on the NYSE have been steadily decreasing for over a week.
Despite the Russell 2000’s advance with a challenge to the September high at 1,184 on Monday, the 50-day moving average is still lower than the 200-day. This tells us that the index is still in an intermediate downtrend.
In addition, a Bollinger Band study indicates the index is overbought. This occurs when the close is closer to the top band than the bottom band. But volatility appears to be decreasing as indicated by a narrowing of the distance between the upper and lower bands.
MACD is in bullish territory, but it is sloping down, indicating continuing weakness in momentum. Look for a short-term pullback within the next few days.
Conclusion
Despite Monday’s move higher by the mid and small caps, the market lacks enthusiasm for a major move higher. Breadth at 1.3-to-1 on the NYSE and 1.6-to-1 on the Nasdaq — while attempting to break to new highs — is not inspiring.
I remain generally on the sidelines but recognize the fact that there are bargains to be had. I will continue to bring those to your attention in the Trade of the Day.
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.
