On Friday, it was all about Greece, and world markets fell over the possibility of a default that could put the European Union in jeopardy. The Dow industrials dropped 0.8%, the S&P 500 lost 0.7%, and the Nasdaq was down 0.6%.
All of the 30 Dow stocks fell, as well as all of the sectors that make up the S&P 500. Health Care SPDR (ETF) (XLV) led the decline, off 1.2%, with the Energy Select Sector SPDR (ETF) (XLE) a close second, down 1.1%. However, volume was very light. But in Europe volume was higher and markets in Germany and France declined more than 1%.
Microsoft Corporation (MSFT), International Business Machines Corp. (IBM) and Qualcomm, Inc. (QCOM) all gave up about 1%. Twitter Inc (TWTR) rose slightly after announcing its CEO is stepping down.
The producer price index (PPI) rose 0.5% in May, the largest one-month increase since September 2012. And the University of Michigan’s preliminary June consumer sentiment index rose to 94.6, a higher reading than expected.
Gold futures fell 0.1% to $1,178.80 an ounce. Crude oil fell on concerns about oversupply with light, sweet crude for July delivery dropping 1.3% to $59.96 a barrel. The U.S. dollar was unchanged on Friday, but for the week fell 1.3% against the euro.
At Friday’s close, the Dow Jones Industrial Average fell 141 points to 17,899, the S&P 500 lost 15 points at 2,094, the Nasdaq was off 31 points at 5,051, and the Russell 2000 fell 4 points to 1,265.
The NYSE’s primary exchange traded a mere 659 million shares with total volume of 2.7 billion. The Nasdaq crossed 1.4 billion shares. On the Big Board, decliners outpaced advancers by 1.8-to-1, and on the Nasdaq, decliners led by 1.4-to-1.
For the week, The Dow rose 0.4%, the S&P 500 gained 0.1%, the Nasdaq fell 0.3% and the Russell 2000 gained 0.4%.
A very narrow trading range has formed on the S&P 500, as illustrated on the chart of the SPDR S&P 500 ETF Trust (SPY). The range is defined by a bottom at $209 and a top at $212.
The May high just below $214 forms a triangle with resistance drawn with a black-dotted line. Support for SPY is at the short-term trendline (red-dotted line). The 50-day moving average is currently at $210.42. Volume is mixed despite the MACD indicator nearing a buy signal
The Dow Jones Transportation Average is in an intermediate downtrend. The all-time high at 9,310 was made in November. Friday’s close is 9.6% off this high.
A close under the October low at 7,700 would confirm a bear market. However, the transports are showing some mild strength. Despite the death cross, the index is forming a pennant, sometimes a preliminary sign of stronger support to come. And MACD offered a weak buy signal.
Conclusion
The S&P 500 is still bullish but shaky, and while the Dow Jones Transportation Average offers a hint of bottom-making, there is nothing solid to guide our future investments.
In a sideways market, long-term buyers should revert to fundamental analysis as they search for “cheap” stocks while traders can play the support and resistance lines provided they get enough room to trade.
Some transportation stocks are fundamental buys. Truckers and rails stand out. And biotechnology stocks are in a buying range after a six-month consolidation (see 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.
