The Truth No Bear (or Bull) Wants to Hear

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Stocks opened higher on Wednesday with the Dow Jones Industrial Average jumping nearly 200 points in the first 90 minutes of trading only to close lower by 100 points, or 0.6%.

However, oversold technology and biotech stocks rebounded after a solid two-week drubbing. The tech-heavy Nasdaq Composite rose 0.4%, while iShares NASDAQ Biotechnology Index (ETF) (IBB) was up 0.6%.

The reason for Wednesday’s broader selling was the Congressional testimony of Federal Reserve Chair Janet Yellen, who outlined several economic risks that could alter the central bank’s plans to raise rates. She said financial conditions are “less supportive of growth” and stressed the need for the Fed to closely monitor developments in global financial markets.

The yield on the benchmark 10-year Treasury note fell to a new one-year low of 1.71% as bond prices rose.

WTI oil prices dropped 1.8% to $27.45 a barrel. Profit-taking hit gold with the precious metal falling 0.3% to $1,194.60 an ounce.

At Wednesday’s close, the Dow Jones Industrial Average fell 100 points to 15,915, the S&P 500 broke even at 1,852, the Nasdaq rose 15 points to 4,284, and the Russell 2000 was unchanged at 963.

The NYSE Composite’s primary exchange traded just over 1 billion shares with total volume of 4.4 billion. The Nasdaq crossed 2.4 billion shares. On the Big Board, advancers slightly exceeded decliners, and on the Nasdaq, advancers and decliners were breakeven. Block trades on the NYSE fell to 5,915 from 6,055 on Tuesday.

Dow Jones Industrial Average Chart
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S&P 500 Chart
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Chart Key

The Dow Jones Industrial Average has yet to break below the August low at 15,666 required to trigger a Dow Theory bear signal.

And volume on the S&P 500 is falling on down days, hardly the stuff panics are made of.

Conclusion

Perhaps, the upcoming Presidents Day holiday, with markets closed Monday, has traders checking out early. Or maybe the bear is still hiding.

Regardless, and I know our readers must be tired of hearing it, until the Dow’s August closing low is penetrated with a lower close, our stance must be sideways. Resistance is roughly at Dow 16,000 to 17,300 and S&P 1,867 to 2,020.

At the many tops on the S&P 500 between 17,600 and 17,800, I did not forecast a breakout because of the trailing mid and small caps. And I may seem stubborn regarding “the call” of a bear market. But discipline is the key to success with stocks.

My advice for traders remains to sell into rallies and buy on dips. Long-term investors should be accumulating quality stocks like our Trade of the Day, Apple Inc. (AAPL).

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-truth-no-bull-or-bear-wants-to-hear/.

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