Dow Sports an All-too-Familiar Pattern

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Higher oil prices resulted in a strong opening Thursday. And while the major indices closed higher for the day, there was little in the way of a follow-through from the opening.

Economic reports that missed the mark and mixed signals from OPEC producers were blamed for the mid-morning profit-taking even though crude oil ended with a gain of 2.8% at $33.22 a barrel. The uncertainty caused by the Federal Reserve’s lack of a clear policy statement also continued to take a toll. And the health care sector was hit hard by some weak earnings.

With 51 of the S&P 500 companies reporting, FactSet noted it was the busiest single day of the earnings season. FactSet also said the S&P 500 is now likely to show a 5.8% decline in Q4 earnings, up from a projected 4.7% decline on Dec. 31.

The yield on the 10-year Treasury note fell to 2% from 2.02% on Wednesday. Gold dropped slightly to $1,115.60 an ounce.

At Thursday’s close, the Dow Jones Industrial Average rose 125 points to 16,070, the S&P 500 gained 10 points at 1,893, the Nasdaq was up 39 points at 4,507, and the Russell 2000 added less than a point at 1,003.

The NYSE Composite’s primary exchange traded over 1 billion shares with total volume of 4.6 billion. The Nasdaq crossed 2.3 billion shares. On the Big Board, advancers outpaced decliners by over 2-to-1, and on the Nasdaq, advancers led by a small margin. Block trades on the NYSE fell to 5,540 from 5,686 on Wednesday.

Microsoft Corporation (MSFT) jumped in after-hours trading after the company exceeded analysts’ earnings and revenue estimates. Amazon.com, Inc. (AMZN) plunged more than 13% after reporting a record quarterly profit but still missing analysts’ expectations.

Dow Jones Industrial Average Chart
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Chart Key

A pattern that is all too familiar to traders is clearly illustrated by Thursday’s minute-by-minute chart of the Dow Jones Industrial Average.

Note the high opening volume and the resulting gap through the important line at 16,000. After a strong opening resulting from a rumor about production cuts from OPEC, the index sagged when Russia denied the cuts.

Then, around mid-morning, positive earnings hit the tape and the Dow reclaimed its opening gains.

Selling on the close almost matched the opening volume but must have been mixed with some buyers since sellers were not able to destroy the afternoon’s gains.

Conclusion

The game has changed. Last year’s outside influences were Greece (not a mention since December), Italy and Spain and their possible exit from the European Union. This year it’s China’s economy and crude oil.

From a technical standpoint, I am focusing primarily on the Dow’s August closing low at 15,666, since it is there that the bull will stand or fall.

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/2016/01/daily-market-outlook-dow-sports-an-all-too-familiar-pattern/.

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