Mid and Small Caps Stage a Powerful Breakout

Advertisement

The Greek tragedy appeared less tragic on Monday as a new proposal from Athens contained steep cuts in pension benefits and raised hopes for a deal. The Stoxx Europe 600 gained 2.3%, and Greek government bonds jumped sharply with the two-year yield falling 5 percentage points to 22.9%.

In the United States, the Nasdaq closed at a new record high, up 0.7%, and the S&P 500 and Dow Jones Industrial Average both rose 0.6%.

Energy, financials and technology led. The energy sector rose 1.2% boosted by a 25.9% jump in Williams Companies Inc (WMB) after a merger offer with Energy Transfer Equity LP (ETE) was rejected by WMB’s management.

The technology sector was helped by Apple Inc. (AAPL), Qualcomm, Inc. (QCOM) and Intel Corporation (INTC), which were all up 0.6% to 0.8%.

Merger mania still is prevalent in the health care group. Anthem Inc (ANTM) made a bid for CIGNA Corporation (CI), but Cigna has reportedly rejected the offer. And Cigna and Aetna Inc (AET) appear to be chasing Humana Inc (HUM). ANTM rose 3.6%, CI gained 4.7%, AET was up 3.2%, and HUM lost 6.11%.

The U.S. dollar gained 0.4% against the British pound and 0.3% against a basket of currencies. And gold for August delivery fell 1.5% to $1,184.10 an ounce as investors abandoned safe-haven investments.

At Monday’s close, the Dow Jones Industrial Average gained 104 points at 18,120, the S&P 500 was up 13 points at 2,123, the Nasdaq rose 37 points to 5,154, and the Russell 2000 gained 8 points to 1,292.

The NYSE’s primary market traded 714 million shares with total volume of 3 billion. The Nasdaq crossed 1.6 billion shares. On the Big Board, advancers outpaced decliners by 1.5-to-1, and on the Nasdaq, advancers led by 1.8-to-1.

Dow Jones Industrial Average Chart
Click to Enlarge

Chart Key

Monday was a strong day for stocks. Even the stodgy Dow Jones Industrial Average had a triple-digit up day and is about 230 points from a new high. And a new MACD buy signal dominates the chart despite relatively low volume and unexciting breadth at 1.5-to-1 on the NYSE.

Russell 2000 Chart
Click to Enlarge

The chart of the Russell 2000 is undeniably bullish, highlighted by a fresh breakaway gap to a new all-time high. The Nasdaq also broke to a new high, adding support to the bullish case.

Conclusion

Even though stocks plowed ahead Monday, I feel like Lucy is going to pull the football away from Charlie Brown again. That may be the result of seemingly endless frustration as we endured weeks of back-and-forth trading and false breakouts. But even the Dow Jones Industrial Average and S&P 500 appear to have new highs in sight.

Merger mania is dominating health care stocks, and the energy sector looks like the next hotbed of M&A activity.

I’ve got to go with the trend, and that trend is undeniably up. Buy with caution, but buy.

Stocks got a big technical boost last week followed by a powerful breakout from the mid and small caps Monday. Yes, I’d like to see follow-through from the Dow Jones Industrial Average and S&P 500, but if the trend is real that should occur shortly.

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/2015/06/daily-market-outlook-mid-small-caps-stage-powerful-breakout/.

©2024 InvestorPlace Media, LLC