Stocks fell Wednesday after a volatile day in which the Dow Jones Industrial Average, impacted by continued weakness in oil, fell 0.9%. Investors appeared anxious over the lack of direction from the Federal Reserve’s minutes from its July meeting. Many appeared to have been anticipating a statement regarding a possible interest rate hike in September.
Two major Dow stocks, Chevron Corporation (CVX) and Exxon Mobil Corporation (XOM), slid to their lowest price in five years. Materials stocks, which are impacted by commodity prices, were also hit with heavy selling.
Crude oil fell to $40.80 a barrel, down 4.3%. And the Market Vectors Steel (ETF) (SLX) lost 2.8%. But gold futures rose 1% to $1,128.10 an ounce. Market Vectors Gold Miners ETF (GDX) jumped 2.9%.
Investors rushed to the safety of Treasury bonds, pushing the 10-year note higher and driving its yield to 2.13%.
However, the Shanghai Composite rose 1.2% after falling as much as 5% early in the session. The rebound came after several companies disclosed that state-backed companies were among their top shareholders. That news, according The Wall Street Journal, boosted confidence in those stocks. Germany’s DAX fell 2.1%, and France’s CAC 40 lost 1.8%.
At Wednesday’s close, the Dow fell 163 points to 17,349, the S&P 500 was off 17 points at 2,080, the Nasdaq fell 40 points to 5,019, and the Russell 2000 lost 12 points at 1,203. The NYSE traded total volume of 3.5 billion shares and the Nasdaq crossed 1.8 billion shares. On both major exchanges, decliners led advancers by 2.8-to-1.
The Dow Jones Industrial Average is close to the near-term support hit on Wednesday at a low of 17,126. That low is smack in the middle of the lows of January (17,136) and February (17,037).
But the senior index is not currently exhibiting the strength usually required to rally. It fell back from the 20-day moving average at 17,538 on Tuesday, advancing Wednesday to only 17,517 before turning back. However, the twin Collins Bollinger Reversals (CBRs) at the January/February lows offer hope of a near-term reversal.
While the Dow Jones Industrial Average is having a difficult time stabilizing, the Dow Jones Transportation Average appears to be having an easier time finding support. Wednesday’s close put the index above its 50-day moving average, if by just 15 points.
Conclusion
All eyes are on the markets in China, and Wednesday’s massive reversal there is a positive. But as we approach a test of our lows of the year, the overall formations of the Dow and S&P 500 appear to be rounding tops, and that is bearish.
If these formations had appeared on any months but those of July and August, both normally sluggish, I would be a seller. However, the summer months traditionally offer little in the way of solid technical guidance, so we will have to wait this out until a more detailed technical picture emerges.
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.
