Stocks May Stall Out Soon

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Energy stocks advanced 2.5% as crude oil rose 0.8% Wednesday to $34.66 a barrel, and the broader market followed with a tepid rally.

The Dow Jones Industrial Average rose 0.2%, the S&P 500 was up 0.4%, the Nasdaq gained 0.3% and the Russell 2000 led, jumping, 1.1%.

The gains in the energy sector came despite the Department of Energy reporting weekly inventories of crude increased by 10.4 million barrels. Analysts were only expecting a 3.6 million-barrel increase.

A better-than-expected ADP National Employment Report boosted buyers’ optimism, especially in the financial sector. Strength in the labor market supports a potential interest rate hike, and banks are likely to benefit most from that as spreads increase.

When the Labor Department releases the February jobs report on Friday, it is expected to show an increase of 200,000 jobs for the month.

The yield on the 10-year Treasury note rose to 1.84% from 1.83% on Tuesday. Gold gained 0.9% at $1,241.10 an ounce.

At Wednesday’s close, the Dow Jones Industrial Average advanced 34 points to 16,899, the S&P 500 was up 8 points at 1,986, the Nasdaq added 14 points at 4,703 and the Russell 2000 jumped 11 points to 1,066.

The NYSE Composite’s primary exchange traded 1 billion shares with total volume of 4.6 billion. The Nasdaq crossed 1.9 billion shares. On the Big Board and Nasdaq, advancers outpaced decliners by 2-to-1. Block trades on the NYSE were slightly higher at 7,215 versus 7,202 on Tuesday.

IWM Chart
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MDY Chart
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Chart Key

On the charts, we can see the similarities between the daily moves in the iShares Russell 2000 Index (ETF) (IWM) and SPDR S&P MidCap 400 ETF (MDY).

Both have broken up through their respective 50-day moving averages on low volume, although MDY’s volume was slightly higher. Each also has an open gap — $111-$112 for IWM and $250-$254 for MDY — that could be a target for profit-taking. And both are entering the first band of significant potential resistance.

Conclusion

As noted several days ago, the style of an advance is just as important as its position. Low volume through minor resistance is not as impressive as high volume backing an advance through heavy selling.

We have finally reached the first band of potential sellers with open gaps as trading goals. Overbought MACD indicators and light volume indicates IWM and MDY, and the indices they track, will stall out before or at the gaps.

But I must emphasize that these are estimates. Near term, the market is very unpredictable and will do whatever it chooses to confound the majority of traders.

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/2016/03/daily-market-outlook-stocks-may-stall-out-soon/.

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