What Will it Take to Start Turning the Bear Back?

Advertisement

Investors were cautious on Thursday prior to Friday’s U.S. employment report given its potential impact on Federal Reserve policy. The day’s modest gains were cut by the close, and the S&P 500 finished up just 0.1%. The Nasdaq slipped to a loss for the session, down 0.4%.

Some analysts predict the Fed will begin a series of small rate hikes regardless of the jobs number (which is expected to show 220,000 jobs added in August). If so, the Fed would be doing so against the advice of the European Central Bank (ECB), who asked the Fed to refrain from a rate hike this month.

The euro fell 1% on Thursday to $1.1133 on reports that the ECB will further loosen the money supply. The Stoxx Europe 600 rose 2.4%.

China’s markets are closed until next week for a holiday commemorating the 70th year since Japan was defeated in WWII.

Initial jobless claims increased by 12,000 to 280,000 for the week ending Aug. 29. Economists had expected an increase to 274,000.

Crude oil rose 1.1%, to $46.75 a barrel. Gold futures lost 0.8% to $1,123.70 a troy ounce. The benchmark 10-year Treasury note’s yield fell to 2.17% from 2.19% on Wednesday.

At Thursday’s close, the Dow Jones Industrial Average rose 23 points to 16,375, the S&P 500 gained 2 points at 1,951, the Nasdaq fell 16 points to 4,734, and the Russell 2000 was down a point at 1,145.

The NYSE Composite’s primary market traded more than 860 million shares with total volume of 3.5 billion shares. The Nasdaq crossed 1.8 billion shares. On the Big Board, advancers outpaced decliners by 1.8-to-1, and on the Nasdaq, advancers led by a small margin.

SPY Chart
Click to Enlarge

Chart Key

There are several technical features worth noting:

  1. The October closing low on SPDR S&P 500 ETF Trust (SPY) at $186.27 was not exceeded on the downside by the current decline, which saw a closing low of $187.27.
  2. January’s Collins-Bollinger Reversal (CBR) buy signal on SPY at $197.86 was exceeded by last week’s closing high at $199.28.
  3. The VIX fell from a high of 53.29 on Aug. 24 to close Thursday at 25.61, which is a positive.
  4. This week’s recovery was limited by lower volume (a negative).
  5. MACD, though improving, has not yet reached recovery levels (a negative).
  6. Breadth, though averaging about 4-to-1 (up versus down) on the NYSE and slightly better on the Nasdaq doesn’t compare favorably to the downside avalanche of the week before.

Conclusion

So far, the “recovery rally” is only mildly encouraging. (See the first three technical features above.)

A close above SPY’s closing high at $199.28 would be a start in turning the bear around. Perhaps we will see that occur today. But then the bulls will be facing an enormous amount of overhead from $200 to $215.

Nothing is impossible, especially over time. However, the amount of time required could be six months or more. And the volume needed to spark a meaningful attempt has not even begun to appear.

Next week, I will focus on the Dow industrials and transports — and the even more difficult road ahead with regard to Dow Theory. I will also take another look at our 17-month moving average chart for improvements.

We will search for some bull calves, but so far only bear cubs have been observed.

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/2015/09/daily-market-outlook-what-will-it-take-to-start-turning-the-bear-back/.

©2024 InvestorPlace Media, LLC