The Market is Not Out of the Woods Yet

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Stocks fell on light volume Monday as investors seemed more focused on the upcoming holiday weekend than trading in equities.

The S&P 500 traded within an 8-point range and closed off 0.2%. This was the second narrowest trading range of the year, and it was accompanied by the second lowest volume of 2016. The Dow Jones Industrial Average, Nasdaq and Russell 2000 were all down less than 0.1%.

Retail sales have been weak lately, and today, investors are likely to focus on earnings reports from Best Buy Co Inc (BBY) and DSW Inc. (DSW). Costco Wholesale Corporation (COST) is scheduled to announce earnings on Wednesday.

On Monday, WTI crude oil fell 0.7% to $48.08 a barrel over concerns that the recent supply interruptions could soon end.

In corporate news, Monsanto Company (MON) rose 4.4% after German pharmaceutical and chemical giant Bayer offered to buy it for $62 billion. Freeport-McMoRan Inc (FCX) gained 2.7% after the company announced it no longer planned to take its energy business public.

Federal Reserve Bank of St. Louis President James Bullard got investors’ attention when he indicated the Fed is likely to raise rates sooner rather than later. This caused gold prices to fall 0.1% to $1,251.50 an ounce. And the yield on the 10-year Treasury note dipped to 1.84% from 1.85% on Friday.

At Monday’s close, the Dow Jones Industrial Average was down 8 points at 17,493, the S&P 500 fell 4 points to 2,048, the Nasdaq also lost 4 points at 4,766, and the Russell 2000 was down a point at 1,111.

The NYSE Composite’s primary exchange traded 819 million shares with total volume of 3 billion. The Nasdaq crossed 1.8 billion shares. On the Big Board, advancers and decliners were almost even, and on the Nasdaq, advancers led by 1.2-to-1. Blocks on the NYSE fell to 5,061 from 5,334 on Friday.

S&P 500 Chart
Click to Enlarge

Chart Key

Last week’s reversal from my proprietary internal indicator, the Collins-Bollinger Reversal (CBR), was an important one for the S&P 500. Had the decline continued, a major head-and-shoulders reversal would have occurred with a downside target of about 1,950.

Instead, what appeared to be a mild reversal reinforced the importance of 2,040 as a significant inflection point.

Conclusion

We are not out of the woods yet. In fact, all the major indices are barely holding onto their bullish stance. Retailer earnings may guide the markets this week, but their dependence on this illustrates just how tenuous current support is. I remain cautiously bearish.

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/2016/05/daily-market-outlook-market-not-woods-yet/.

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