Mid- and small-cap stocks blasted to new highs before profit-taking in the last 30 minutes of trading cut into gains.
The Nasdaq broke to its first intraday all-time high in 15 years. The mid-cap index rose 1.3% and led the broad market despite concerns over the economy and Greece.
Buyers moved in on smaller companies immediately after the opening bell with the Russell 2000 index gapping up a full 3 points and continuing higher until noon when it, too, established a new high.
The rally was led by the biotechnology sector. The iShares NASDAQ Biotechnology Index (ETF) (IBB) rose 3.1% and is up 25% so far in 2015. But buying was not just focused on small and mid caps — all 10 sectors of the S&P closed higher. And even the Dow Jones Transportation Average spiked 1.5%.
Thursday afternoon saw a resurgence of buying when Germany’s Die Zeit reported that Greece would receive an extension on its debt payments to the ECB until year end. But traders sold when the German chancellor denied the story.
Light, sweet crude oil for July delivery gained 0.9% to $60.45 a barrel. Gold was up on a weaker U.S. dollar and continuing concerns over Greece, gaining 2.1% to close at $1,202 an ounce.
The yield on the benchmark U.S. 10-year Treasury note rose to 2.35% from 2.32% on Wednesday.
Oracle Corporation (ORCL) fell 4.8% after reporting a larger-than-expected sales decline and giving disappointing guidance for its current quarter. Kroger Co (KR) rose 1% after posting better-than-expected fiscal Q1 earnings.
At Thursday’s close, the Dow Jones Industrial Average gained 180 points at 18,116, the S&P 500 rose 21 points to 2,121, the Nasdaq gained 68 points at 5,133, and the Russell 2000 jumped 16 points to 1,285.
The NYSE’s primary market traded 852 million shares with total volume of 3.5 billion. The Nasdaq crossed 1.9 billion shares. On the Big Board, advancers outpaced decliners by 2-to-1, and on the Nasdaq, advancers led by 2.3-to-1.
It’s been a long time coming — since March 2000 to be exact — but the Nasdaq finally made a new intraday high, along with a new closing high.
Our chart also shows a new MACD buy signal, but at the tail end of a non-confirming trendline. The MACD indicator should confirm new highs by also making a new high, but note that the opposite occurred in December, February, April, May, and on Thursday. This indicates that buyers are lacking and that a follow-through is unlikely.
Many of the same characteristics found on the Nasdaq chart are replicated on the chart of the iShares Russell 2000 Index (ETF) (IWM), including a non-confirming MACD trendline. Thursday’s volume was slightly less than Tuesday’s volume, another sign of buyers’ fatigue.
Conclusion
The charts speak for themselves — telling us that a weak breakout occurred in the small- and mid-cap stocks. Thus, prices will probably head slightly higher but not enough to chase this bull.
Some of the move higher is due to a restructuring of the indices, so volume will increase. But don’t be fooled into chasing high-P/E stocks at this level. The bull is likely to stumble, and it’s best to stay away when he does.
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.
