Market Not Done Purging Bulls

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Stocks fell sharply Thursday on a broad front with all 10 sectors of the S&P 500 declining. The index was off 1.4%, which was attributed in part to a dramatic fall in oil prices.

Crude prices dropped 2.7% to $41.75 a barrel on a larger-than-expected increase in U.S. oil stockpiles. The energy sector was hit with a 2.3% loss and is now down 5.1% for the week.

Further angst was created by the Federal Reserve. Neither Chair Janet Yellen nor any of the governors offered specific guidance on an interest rate hike or comments on the near-term outlook for the economy. They did, however, reiterate their feeling that rates should be increased sometime this year. Their responses lacked conviction, though, and some commentators opined that the rate increase could be put off until early next year.

GoPro Inc (GPRO) grabbed headlines as the stock fell below its initial public offering price of $24 for the first time ever. The shares were down 7.8% on the day and are now off more than 75% from their post-IPO high above $98.

The widely held iShares NASDAQ Biotechnology Index (ETF) (IBB) fell 2.1% and closed below its 50-day moving average.

SPDR S&P Retail (ETF) (XRT) lost 1.3% despite a 6.1% jump in Kohl’s Corporation (KSS) on better-than-expected quarterly results.

ECB President Mario Draghi reiterated that the bank will reconsider its policy on stimulation at its next meeting in December. He had previously expressed a desire to cut rates again in December.

Gold lost 0.4% at $1,080.80 an ounce. The World Gold Council reported demand for gold rose 8% in Q3, boosted by retail investors. Despite this, the price of bullion fell 2% in the quarter.

At Thursday’s close, the Dow Jones Industrial Average fell 254 points to 17,488, the S&P 500 lost 29 points at 2,046, the Nasdaq dropped 62 points at 5,005, and the Russell 2000 was down 23 points at 1,155.

The NYSE Composite’s primary exchange traded 879 million shares with total volume of 4 billion. The Nasdaq crossed 1.8 billion shares. On the Big Board, decliners outpaced advancers by 4.2-to-1, and on the Nasdaq, decliners led by 3.4-to-1.

Block trades on the NYSE increased slightly to 5,399 from 5,375 on Wednesday.

Dow Jones Industrial Average Chart
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Chart Key

The Dow Jones Industrial Average broke three important support points Thursday: the 200-day moving average at 17,589, the 20-day moving average at 17,620 and the support line at 17,560. In addition, MACD flashed a confirmed sell signal.

The next support is the line at 17,069, and then the 50-day moving average at 16,975.

Dow Jones Transportation Average Chart
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The Dow Jones Transportation Average, as readers know, never confirmed the break higher by the industrials. But it appears the “divergence” may be over in that the industrials have finally failed in an attempt to jump into new high territory.

The transports’ close below its 50-day moving average, although not a trend-breaker, is not favorable. And the MACD sell signal is bad news as well.

Conclusion

It appears from Thursday’s retreat that the late-August correction may not have purged enough bulls from the market to establish a strong advance. Thus, it is again prudent to trade from the sell side and hold cash for a better longer-term investment opportunity.

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-market-not-done-purging-bulls/.

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