Stocks rebounded Tuesday after two days of losses despite a lack of encouraging news from Greece and the overhanging Federal Reserve meeting. Investors ignored the negatives of last week and instead bought stocks at technical support levels.
All 10 of the S&P’s sectors closed higher. Consumer staples led the pack with a gain of 1.1%. Telecom services gained 0.6%, and utilities and health care were up 0.5%. But the iShares NASDAQ Biotechnology Index (ETF) (IBB) lagged, up only 0.2%.
While U.S. investors ignored troubles in Greece, that country’s market fell 4.8%, led by bank stocks. And the yield in Greece’s two-year bond rose to 29.3%, its highest level since April.
Crude oil was up 0.8% to $59.97 a barrel, and the energy sector rose 0.8%. Gold and platinum fell in response to a higher U.S. dollar. Gold dropped 0.4% to $1,180.90 an ounce, and platinum declined 0.8% to $1,079.80 an ounce, a six-year low. Both are traded internationally in dollars, and thus become more expensive to foreigners when the dollar rises.
Housing starts fell 11.1% in May to 1.036 million versus an expected decline to 1.09 million. But offsetting the negative housing numbers, building permits rose to an annualized rate of 1.275 million last month versus an expected decline to 1.1 million.
At Tuesday’s close, the Dow Jones Industrial Average gained 113 points at 17,904, the S&P 500 rose 12 points to 2,096, the Nasdaq gained 26 points to 5,056, and the Russell 2000 was up 8 points to 1,270.
The NYSE’s floor traded 653 million shares with total volume of 2.9 billion shares. The Nasdaq crossed 1.6 billion shares. On the Big Board, advancers outpaced decliners by 1.8-to-1, and on the Nasdaq, advancers led by 1.4-to-1.
The small-cap Russell 2000 index has been consolidating following its third highest close on record. This consolidation forms a trading band with support at 1,243 and resistance at 1,268. The resistance was broken Tuesday by a mere point, so today it will be important for the Russell 2000 to rally and establish 1,268 as a support line rather than a resistance line.
If the index pulls back, look for initial support at 1,252 (50-day moving average) to hold back selling, but the main support is at 1,243.
The Nasdaq chart is not as strong as that of the Russell 2000, but it is still positive in that the index reversed from its near-term trendline at 4,986 and was able to recover above its 50-day moving average at 5,023.
MACD is in the negative zone, and to the classic technician it is still troubling that MACD failed to follow the index to new highs. At the bottom of the chart, note the declining dotted red trendline in the indicator drawn from the February high. This is known as a “non-confirming trendline” and is considered an indication that the index is going to fall.
Conclusion
For those traders who like to see the soldiers lead, today’s charts are a delight, despite the non-confirming nature of MACD on the Nasdaq chart. The small and mid caps are supporting the overall market and may even sustain a sideways trend through the summer until the cavalry comes to the rescue in October.
Trading the support lines and moving averages of each index has thus far proven to be more profitable than holding stocks through the many see-saw runs since April’s highs.
A mildly bullish view is still in place. But many difficulties cloud the remainder of the summer. Despite the near-term support of the Nasdaq and Russell 2000, it is the S&P 500 that must eventually shake the market from its summer sleep.
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.
