Market Offering More Questions Than Answers

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Friday ended the best week in months with a mild advance in a comparatively dull session. While all 10 sectors of the S&P 500 registered gains for the week, only half were up on Friday.

Friday’s malaise seemed to be the result of investors’ concerns over Q3 earnings and especially slow revenue growth in high-tech companies. FactSet is forecasting a 5.5% year-over-year decline in third-quarter earnings and a 3.3% decline in revenues.

Crude oil rose 9% for the week, boosting energy stocks 7.8%. The November contract closed the week at $49.63 a barrel, the highest settlement since late July. Prices were boosted by a falling rig count, which is currently the lowest since July 2010. Gasoline futures rose 5.6% for the week to $1.4167 per gallon.

Gold also rallied in response to expectations that the Federal Reserve will not raise interest rates this year. It closed up 1% to $1,156.30 an ounce.

At Friday’s close, the Dow Jones Industrial Average rose 34 points to 17,084, the S&P 500 gained 1 point at 2,015, the Nasdaq added 20 points at 4,830, and the Russell 2000 was up 2 points to 1,165.

The NYSE Composite’s primary exchange traded 922 million shares with total volume of 3.7 billion. The Nasdaq crossed 1.8 billion shares. On the Big Board, advancers outpaced decliners by 1.3-to-1, and on the Nasdaq, advancers led 1.2-to-1.

Dow Jones Industrial Average Chart
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Chart Key

The Dow Jones Industrial Average exceeded an important inflection point Friday at 17,069, the January reversal from the 200-day moving average and August’s breakdown line.

Nasdaq Chart
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The Nasdaq, the former leader of the advance, has rallied from a double-bottom at about 4,500 to its 200-day moving average at 4,835 and the intermediate resistance line drawn from the July high. MACD is overbought and upside volume is lower than average (black line).

Conclusion

As noted in Friday’s Daily Market Outlook, “It’s not only important what the market does, but how it does it.” Buying volume is lower than normal, and small and mid caps are sluggish. But the Dow Jones Industrial Average has closed significantly above its 50-day moving average and slightly above the important January reversal line at 17,069.

What appears to be propelling the market is a reflex rally in energy and another delayed decision on interest rates by the Fed — both potentially negative developments.

So what’s the long-term impetus for a sustained rally? Perhaps earnings and revenues will come in higher than the forecasted declines. Today, I’ve got more questions than answers.

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-market-offering-more-questions-than-answers/.

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