Bulls Fight to Hold Rally

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Stocks made little progress Tuesday due to a sell-off in the biotech sector, with the iShares NASDAQ Biotechnology Index (ETF) (IBB) falling 3.6%.

Key biotech stocks were hit hard. Vertex Pharmaceuticals Incorporated (VRTX) fell 4.4%, Gilead Sciences, Inc. (GILD) was down 1.7% and Celgene Corporation (CELG) lost 3.8%. Some major pharmaceutical stocks were also the subject of heavy selling. Merck & Co., Inc. (MRK) lost 2.8% and Pfizer Inc. (PFE) was down 2.1%.

Energy stocks, on the other hand, rallied following a big jump in crude oil futures due to lower production forecasts for both the U.S. and international producers. WTI for November delivery rose 4.9% to a final fix of $48.53.

A “risk-off” environment led to the purchase of U.S. Treasuries. The yield on the benchmark 10-year note fell to 2.04% from 2.06% on Monday. Gold rose 0.8% to settle at $1,146.80 an ounce.

The U.S. dollar fell 0.8% against the euro, which closed at $1.1273. But analysts pointed out that the trend of easier money in Europe and Japan could lead to a stronger greenback.

At Tuesday’s close, the Dow Jones Industrial Average gained 14 points at 16,790, the S&P 500 fell 7 points to 1,980, the Nasdaq lost 33 points at 4,748, and the Russell 2000 was down 8 points at 1,134.

The NYSE Composite’s primary exchange traded 1 billion shares with total volume of over 4 billion. The Nasdaq crossed just over 2 billion shares. On the Big Board, advancers outpaced decliners by 1.2-to-1, and on the Nasdaq, decliners led by 1.2-to-1.

Dow Jones Industrial Average Chart
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Dow Jones Transportation Average Chart
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Chart Key

Recently, I’ve been focusing on the S&P 500, which found support at the August low last week. However, both the Dow Jones Industrial Average and Dow Jones Transportation Average have made a recovery bounce from above the August lows to their respective 50-day moving averages.

That’s the good news. The bad news is that the industrials are struggling to hold above their 50-day moving average while the transports closed 70 points below its 50-day on Tuesday.

Conclusion

The battle to hold the current rally continues. However, with a struggle at the 50-day moving averages and massive overhead, as well as a bearish intermediate downtrend line (not shown), the rally is looking more like the result of a short-covering panic than a bullish reversal.

My advice remains to sell into rallies. This dead cat seems propelled by nothing more than panic buying.

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/2015/10/daily-market-outlook-bulls-fight-to-hold-rally/.

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