Bulls Look Like They Could Use a Rest

Advertisement

After last week’s swings, Tuesday was rather calm with the S&P 500 inching to a new high but trading in an 11-point range to close up 0.2%. The Dow and Nasdaq rose 0.2% and 0.1%, respectively.

The modest gains appeared to be the result of optimism concerning a deal between Greece and the EU. The deadline for an agreement is Friday, and the assessment is that the EU will bend and give Greece an extension on getting its house in order.

At the end of last week, FactSet reported that with 391 companies of the S&P 500 having reported, Q4 profits are on track to rise 3.1% from 2014. The S&P 500 now trades at 17.4 times trailing 12-month earnings versus a 10-year average of 15.1.

Medtronic PLC (NYSE:MDT) rose 3.7% after earnings beat expectations. The company recently completed its acquisition of rival Covidien and should benefit from moving its headquarters to Dublin to gain a tax advantage. Goodyear Tire & Rubber Co (NASDAQ:GT) jumped 2.7% on better-than-expected earnings.

Gold futures fell 1.5% to $1,208.10 an ounce. Crude oil futures rose 1.4% to $53.53 a barrel.

At Tuesday’s close, the Dow Jones Industrial Average rose 28 points to 18,048, the S&P 500 gained 3 points at 2,100, the Nasdaq was up 5 points at 4,899, and the Russell 2000 advanced 2 points to 1,225.

The NYSE’s primary market traded 780 million shares with total volume of 3.4 billion. The Nasdaq crossed 1.7 billion shares. On the Big Board, decliners outpaced advancers by 1.3-to-1, and on the Nasdaq, advancers led by 1.3-to-1.

S&P 500 Chart
Click to Enlarge

Chart Key

Although the S&P 500 rose just 3 points, it inched to a new high. However, its MACD indicator is beginning to curl, and that could be a signal that the bulls need a rest.

The S&P 500 has gained over 5% so far in February, and even the strongest bulls need to occasionally water. There are three resting holes for this old bull: first at 2,079, then at 2,064, and finally at 2,019. After that a spark of adrenaline might kick in as the 200-day moving average would be in view.

Conclusion

The Russell 2000 small-cap index is acting slightly better than the blue-chip Dow and the broader market S&P 500 due to the fact that it has less foreign exposure. But Dow theorists are not focusing on the small caps. Their primary interest is with the Dow industrials and transports since neither has registered a new high.

As pointed out by Raymond James’ Jeff Saut, the Dow industrials must close above their Dec. 26 closing high of 18,053.71 and the transports above their Dec. 29 closing high of 9,217.44 in order to confirm a signal that the bull has begun to move to greener pastures.

Saut concluded by reminding us that in a bull market all surprises come on the upside. Sound familiar? Old wisdom is usually solid wisdom because it has stood the test of time.

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/2015/02/daily-market-outlook-bulls-look-like-use-rest/.

©2024 InvestorPlace Media, LLC