Expect Profit-Taking in This Low-Volume Week

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Stocks jumped at Friday’s open and then spent the remainder of the day struggling to retain the gains against mild profit-taking. The S&P 500 gained 0.4% to close its best week in almost a year. The Dow Jones Industrial Average gained 0.5% for its biggest weekly gain since early last month.

Bond markets have discounted a rise in interest rates by the Federal Reserve in December. The yield on the two-year Treasury note rose to 0.91%, while the yield on the 10-year rose to 2.26%.

Nike Inc (NKE) gained 5.5% after announcing a stock split and increasing its quarterly dividend.

Health care stocks regained some of Thursday’s losses, up 0.9%. UnitedHealth Group Inc (UNH) was up 2.1% after selling off Thursday when it said it was considering withdrawing from the Affordable Care Act exchanges due to major losses.

Energy stocks continued to fall, down 1.1%, even though crude oil rose 0.4% to $41.90 a barrel.

The euro fell 0.8% against the U.S. dollar to $1.07395, and Goldman Sachs predicted the greenback and euro will hit parity within six months. Gold fell 0.4% to $1,076.40 an ounce.

At Friday’s close, the Dow Jones Industrial Average gained 91 points at 17,824, the S&P 500 rose 8 points to 2,089, the Nasdaq gained 31 points at 5,105, and the Russell 2000 was up 8 points at 1,175.

The NYSE Composite’s primary market traded 976 million shares with total volume of 3.9 billion. The Nasdaq crossed 1.7 billion shares. On the Big Board, advancers outpaced decliners by 1.5-to-1, and on the Nasdaq, advancers led by 1.7-to-1. Block trades increased to 6,210, up from Thursday’s 5,117.

For the week, the Dow rose 3.4%, the S&P 500 gained 3.3%, the Nasdaq advanced 3.6% and the Russell 2000 rose 2.5%.

Nasdaq Chart
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Chart Key

The Nasdaq has shown some significant strength by breaking into the 5,025 to 5,165 trading range. And it is impressive that after closing the gap in October it could mount a successful move back into that trading range. Despite the move higher, upside volume is not supporting a penetration to a new high.

IWM Chart
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Although iShares Russell 2000 Index (ETF) (IWM) has reversed from its 50-day moving average, it has not begun to attack the massive overhead, which starts at its November high and gets very thick above the 200-day moving average at $120.72. Like the Nasdaq, IWM has very low recovery volume, which is a negative.

Conclusion

With almost all of the major indices now mildly overbought and small and mid caps approaching major resistance, a round of profit-taking is the most likely move in this holiday week. The traditionally low holiday volume will probably not help the bulls, although they must be very thankful for the success of the current rally.

Note to traders: It was brought to my attention in Raymond James’ Jeff Saut’s “Morning Tack” that the NYSE has decided to eliminate GTC and stop-loss orders, effective Feb. 26, because they believe such orders had a lot to do with the Aug. 24 “flash crash.”

But why not retain the ability to enter stop-limit orders, thus denying the “market order” trigger and the ability of the floor traders to buy in at a low price and then sell at a higher price? Please, NYSE, let’s think this one through before creating another problem.

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/2015/11/daily-market-outlook-expect-profit-taking-in-this-low-volume-week/.

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