Friday’s broad-based rally, led by financial and energy stocks, pushed the Dow Jones Industrial Average above its 200-day moving average for the first time this year. The gains helped stocks log their fourth week in the black, which marks the longest period of consecutive gains in over four months.
The ECB’s outline of additional stimulus plans helped push the U.S. financial sector higher. And the energy sector’s gains were the result of easing concerns about the global oil supply glut, due in part to an International Energy Agency (IEA) report that said crude may have finally bottomed.
Oil hit a three-month high Friday and closed 1.7% higher at $38.50 a barrel. The energy sector was up 2.6%. Dow 30 member Chevron Corporation (CVX) was up 0.7% on Friday and 7.6% for the week, making it the blue-chip index’s best performer.
The euro lost 0.3% against the U.S. dollar on Friday at $1.1151. Gold dropped 1% to $1,258.70 an ounce, and the yield on the benchmark 10-year Treasury note rose to 1.98% from 1.93%. This represents investors’ “risk-on” behavior.
At Friday’s close, the Dow Jones Industrial Average rose 218 points to 17,213, the S&P 500 gained 33 points at 2,022, the Nasdaq jumped 86 points to 4,748 and the Russell 2000 added 24 points at 1,088.
The NYSE Composite’s primary exchange traded 997 million shares with total volume of 4 billion. The Nasdaq crossed 1.8 billion shares. On the Big Board, advancers outpaced decliners by 4.9-to-1, and on the Nasdaq, advancers led by 3.7-to-1. On the NYSE, block trades fell to 5,778 from 6,446 on Friday.
For the week, the Dow Jones Industrial Average rose 1.2%, the S&P 500 gained 1.1%, the Nasdaq was up 0.7% and the Russell 2000 advanced 0.5%.
The Dow Jones Industrial Average has the strongest chart, having exceeded its 200-day moving average at 17,153. The index also closed above the resistance line at 17,175.
However, the intermediate resistance line just above 17,500 is an inflection point, and there is a considerable amount of overhead that buyers must overcome before challenging that line.
The Nasdaq is still under a long-term bearish signal, the death cross, since it has not been able to close above its 200-day moving average. MACD is falling and volume, like the on the Dow, is below average.
Conclusion
Both of these indices managed to escape an outside reversal on Thursday and then closed higher on Friday. That shows strength. But volume is below average and MACD is falling. Plus, breadth, at an average of less than 2-to-1 for the past 10 days, is not enough to punch the key indices much higher (although Friday’s 4.9-to-1 on the NYSE showed strength).
While the major indices have advanced for four consecutive weeks, they are now in the area of maximum resistance. I am cautious, and decisions must wait on stocks’ reactions to this week’s economic reports.
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.
