Past Doesn’t Bode Well for the Bulls

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With the major indices near their all-time highs, investors seem cautious. Stocks fell fractionally on Friday but still closed higher for the week, helped by strength in financials.

The sector lost 0.4% on Friday, though. Citigroup Inc (C) rose 3.5% intraday but suffered a technical reversal by closing down 0.1%. The bank reported Q1 profits fell 27%, but this exceeded analysts’ reduced forecasts.

Oil dropped 2.7% to $40.36 a barrel after Iran’s oil minister said he would not attend Sunday’s meeting of major producers in Doha, Qatar to discuss a potential output freeze.

Investors will likely be focused on earnings this week. The Wall Street Journal cited Ilya Feygin, managing director at broker WallachBeth, who said reports from key industrials General Electric Company (GE) and Honeywell International Inc. (HON) would be a “gauge of what’s going on for the economy.”

Analysts expect GE to report a 5% drop in first-quarter earnings to 20 cents per share, while HON is expected see profits increase 6% to $1.50.

Investors shifted their emphasis to safer investments on Friday due to a decline in consumer confidence. As they bought bonds, the yield on the benchmark 10-year Treasury note fell to 1.76% from 1.80% on Thursday.

At Friday’s close, the Dow Jones Industrial Average fell 29 points to 17,897, the S&P 500 was down 2 points at 2,081, the Nasdaq lost 8 points at 4,938 and the Russell 2000 was up 2 points at 1,131.

The NYSE Composite’s primary exchange traded 1 billion shares with total volume of 3.7 billion. The Nasdaq crossed 1.7 billion shares. On the Big Board, advancers were ahead of decliners by 1.1-to-1, and on the Nasdaq, decliners led by a fraction.

For the week, the Dow rose 1.8%, the S&P 500 gained 1.6%, the Nasdaq added 1.8% and the Russell 2000 jumped 3.1%.

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

The charts of the two major indices are bullish but sluggish. We’ve been here before with both the Dow Jones Industrial Average and S&P 500, with the indices pushing up against their old high several times and then failing. And each failure was preceded by declining buying and momentum and a MACD indicator that was negative.

Conclusion

How many times can an index pound into resistance before breaking out or failing and plunging?

In December, both the Dow Jones Industrial Average and S&P 500 even had bullish golden crosses (50-day moving average crosses up through the 200-day) only to reverse within several weeks.

As our readers know, I’m persuaded more by price and volume than other indicators. Since February, prices have risen sharply, running ahead of volume, which began sloping down in January.

If buyers appear in high numbers, they will be rewarded. But if what’s past is prologue, buyers at current prices will not be rewarded.

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/2016/04/daily-market-outlook-history-doesnt-bode-well-bulls/.

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