The major indices started lower Monday as oil prices fell, but they shook off much of the early declines to close mixed.
WTI oil fell 3.4% to $37.18 a barrel as the major state and OPEC producers stalled on a pact to freeze production. U.S. oil prices have risen almost 45% from their low in February. And any cut in foreign production is anticipated to result in an increase in shale production.
Another lid on stock prices comes in the form of a potential interest rate increase by the Federal Reserve. The Wall Street Journal reported fed funds futures suggested a 50% chance of a rate increase at the June policy meeting and a 76% chance in December.
The yield on the 10-year Treasury note fell to 1.97% from 1.98% on Friday as bond prices rose. Gold fell 1.1% to $1,244.40 an ounce but has risen close to 20% so far this year.
At Monday’s close, the Dow Jones Industrial Average rose 16 points to 17,229, the S&P 500 fell 3 points to 2,020, the Nasdaq gained 2 points at 4,750 and the Russell 2000 lost 3 points at 1,084.
The NYSE Composite’s primary market traded 858 million shares with total volume of 3.5 billion. The Nasdaq crossed 1.6 billion shares. On the Big Board, decliners outpaced advancers by 1.3-to-1, and on the Nasdaq, decliners led by 1.2-to-1. Block trades fell to 4,923 from 5,778 on Friday.
The late-December breakdown in iShares Russell 2000 Index (ETF) (IWM) was preceded by a gap down from $112.51 to $110.83. That gap remains an important target for IWM.
The ETF punched through the resistance line at $107 but appears to have stalled as it entered the massive resistance zone that began in August, and before that, extended to March of last year.
The “W” bottom is an indication that the low is in place, but the enormous overhead and the downtrending 200-day moving average at $114.41 are strong barriers that will most likely block a move to new highs.
Conclusion
Monday’s tape was dull for traders; however, long-term investors are finally seeing some positive signals, including the “W” bottom on IWM. Although it may take time to break to new highs, corrections to the $102 area could turn profitable.
But purchases at any level, barring special situations, are going to take time to produce results. Therefore, traders should be selling into rallies and buying on pullbacks.
Long-term investors should seek value where they can find it, but with 87.9% of S&P 500 stocks above their 50-day moving averages, according to Jeff Saut of Raymond James, and with the market’s internal energy almost used up, it is unlikely that we will see a breakout this year.
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.
