After two days of advances, stocks lost ground on Thursday. The reversal followed a decision by the Federal Reserve to refrain from raising interest rates due to concerns over the recent turbulence in global markets.
Accusations were leveled by some commentators that the Fed has become a “central bank to the world.” While the governors did note concerns about weakness in global economies and markets, the policy statement issued was almost identical to its previous position paper.
The Dow Jones Industrial Average fell 0.4% and the S&P 500 lost 0.3%. The Nasdaq rose 0.1%, but it had been up as much as 1.5% before falling sharply in the final 45 minutes of trading.
Initial claims declined to 264,000 versus an expectation of 275,000. Single-family starts declined to 739,000 in August from 762,000 in July. And the Philly Fed’s Business Outlook Survey declined in September, marking the first contraction in since February 2014.
The yield on the benchmark 10-year U.S. Treasury note fell to 2.22% from 2.30% on Wednesday. And the U.S. dollar fell to a three-week low against the euro, which closed at $1.1419. Crude oil dropped 0.5% to $46.90 a barrel, and gold rose 1% to $1,130.20 an ounce.
At Thursday’s close, the Dow Jones Industrial Average fell 65 points to 16,675, the S&P 500 fell 5 points to 1,990, the Nasdaq rose 5 points to 4,894, and the Russell 2000 gained 5 points to 1,181.
The NYSE Composite’s primary exchange traded over 975 million shares with total volume of 4.2 billion. The Nasdaq crossed 1.9 billion shares. On the Big Board, advancers outpaced decliners by 1.6- to-1, and on the Nasdaq, advancers led by 1.3-to-1.
An ascending wedge on the daily chart of the Dow Jones Industrial Average signals a bearish event. This is coupled with a downside reversal from my proprietary indicator, the Collins-Bollinger Reversal (CBR). These twin signals are bad for the bulls.
We see a similar ascending wedge on the chart of the SPDR S&P 500 ETF Trust (SPY), along with another CBR sell signal.
Conclusion
On Wednesday morning, I reviewed ascending wedges on the charts of the Nasdaq and iShares Russell 2000 Index (ETF) (IWM). Today, I showed similar formations on the charts of the Dow Jones Industrial Average and SPY. But a new signal has appeared within these formations that enhances their bearish implications — sell signals from my Collins-Bollinger Reversal indicator.
The CBR sells occurred just as both indices were approaching their immediate resistance lines, and each flashed higher-than-average volume. The bear is out of his cave and on the prowl.
If you missed my explanation of the bearish nature of the ascending wedge formation, you can review it in the previous Daily Market Outlook.
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.
