Traders Take Profits in Defensive Investments

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The major indices consolidated Friday while the mid and small caps continued an advance that began on Feb. 12. But despite Friday’s pause, stocks achieved their second consecutive week of gains.

The S&P 500 rose 1.6% for the week, turning what looked like a sure loss for February into a gain of 0.4%. The run up was attributed to a rally in crude oil, which rose 3.2% for the week to finish at $32.78 a barrel. However, the energy sector was only up 0.7% for the week.

The yield on the 10-year Treasury note rose to 1.76% from 1.71% as buyers continued to seek safety in bonds. But gold fell 1.5% Friday to $1,219.80 an ounce on profit taking.

The U.S. dollar hit a three-week high against the euro, gaining 0.8% on Friday.

At Friday’s close, the Dow Jones Industrial Average fell 57 points to 16,640, the S&P 500 lost 4 points at 1,948, the Nasdaq rose 8 points to 4,590 and the Russell 2000 was up 6 points 1,037.

The NYSE Composite’s primary exchange traded slightly over 1 billion shares with total volume of 4.4 billion. The Nasdaq crossed 1.8 billion shares. On the Big Board, advancers outpaced decliners by 1.6-to-1, and on the Nasdaq, advancers led by 1.8-to-1. Block trading on the NYSE declined slightly to 5,631 from 5,673 on Thursday.

For the week, the Dow rose 1.5%, the S&P 500 gained 1.6%, the Nasdaq was up 1.9% and the Russell 2000 gained 2.7%.

GLD Chart
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Chart Key

Note the almost perfect saucer breakout on the chart of the SPDR Gold Trust (ETF) (GLD). Profit taking nipped away a small amount at the end of the week, but a bullish pennant is in place that will likely break higher.

The Wall Street Journal reported volume on bullish derivatives on gold hit their highest level in February since the euro zone debt crisis of 2011. The same article said billionaire entrepreneur Mark Cuban was buying call options on GLD.

I see profit taking easily taking GLD back to $115.

Dow Jones Utility Average Chart
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I showed this chart of the Dow Jones Utility Average in the previous Daily Market Outlook, and on Friday, it was hit with profit taking. Nevertheless, the index has been one of the top performers of the year.

Conclusion

On Friday, I asked readers to comment on why they think the market is favoring defensive investments while at the same time rallying from the January lows. I want to thank you for your responses, most of which were well reasoned and backed by facts.

I found the comments foreverkingdom, Mike Siroky, Mosey, occamsrazortrader and Fred especially interesting, and many others that I wish I had the space to quote.

I will provide my own thoughts regarding this tomorrow, but if you go back to Friday’s responses you will not be surprised by my conclusions.

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/2016/02/daily-market-outlook-traders-take-profits-in-defensive-investments/.

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