Stocks closed higher Monday, but the gains were modest and volume was slightly below average.
A sell-off in energy stocks put a lid on the Dow Jones Industrial Average and the S&P 500. Exxon Mobil Corporation (XOM) and Chevron Corporation (CVX) lost 1.8% and 1.3%, respectively, taking 18 points from the Dow industrials.
The selling was spurred by a 2.9% drop in crude oil amid concerns over higher production in Iran and an economic slowdown in the world’s No. 2 oil consumer, China.
Biotech stocks opened higher, but a letter from presidential candidate Hillary Clinton to the FDA and FTC requesting an inquiry into drug pricing cut into gains. The iShares NASDAQ Biotechnology Index (ETF) (IBB) closed 0.5% higher but had been up as much as 2.1% intraday.
Morgan Stanley (MS) fell 4.8% after issuing a disappointing earnings report.
Weight Watchers International, Inc. (WTW) jumped 105% following an announcement that Oprah Winfrey is purchasing 10% of the company’s shares and joining its board.
Gold lost 0.9% at $1,173.30 an ounce. The yield on the 10-year Treasury note rose to 2.03% from 2.02% on Friday. The euro fell to a 10-day low versus the U.S. dollar ahead of this week’s ECB meeting.
At Monday’s close, the Dow Jones Industrial Average rose 15 points to 17,231, the S&P 500 gained a fraction at 2,034, the Nasdaq was up 19 points at 4,905, and the Russell 2000 rose 2 points to 1,164.
The NYSE Composite’s primary market traded 826 million shares with total volume of 3.3 billion. The Nasdaq crossed 1.6 billion shares. On the Big Board, decliners outpaced advancers by 1.2-to-1, and on the Nasdaq, advancers held a slight lead.
One of our faithful readers pointed out that the S&P 500’s 17-month moving average at 2,027.21 was penetrated on the upside on Friday. However, I do not review this indicator and issue signals until the end of the month. The reader correctly noted the index could close below this line with almost two weeks to go before month’s end.
Also note volume is light and MACD is arching down. The S&P 500 is entering broad overhead with 2,050 the mere beginning of it.
Conclusion
The “W” bottom is a convincing technical feature that cannot be ignored. Therefore, I am confident we have had a “correction” unless some unforeseen negative event occurs.
Prior to the August sell-off, I said that despite the strength of the major indices, I was not confident in a major breakout. I cautioned buyers to lay low until late October.
It appears likely that even though a bottom is in place, there is the possibility that a wide, static trading range is developing. A range of 1,950 to 2,080 on the S&P 500 could last into the first quarter of next year and provide some excellent opportunities for trading profits.
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.
