Tuesday’s broad advance was driven by a recovery in oil prices and resulted in the best day for stocks in weeks. All sectors of the S&P 500 advanced, and the index gained 1.3%, as did the Dow Jones Industrial Average. But there were signs that traders are not convinced the rally will last.
The yield on the 10-year Treasury note was unchanged at 1.77%, and gold only lost 0.1% at $1,263.90 an ounce. Plus, trading volume on the advance was light.
But despite concerns about the health of the global economy — topped by worries over renewed problems in Greece, China’s economy and Europe’s stability — the Dow and S&P 500 have both gained 0.9% so far this month.
Financials outperformed on Tuesday, up 1.4%. Notable gainers included Dow 30 stocks Goldman Sachs Group Inc (GS), up 2.5%, and JPMorgan Chase & Co. (JPM), up 1.4%. Credit Suisse Group AG (ADR) (CS) jumped 4.3% after announcing strong Q1 results.
Crude oil rallied 2.8% to $44.66 a barrel, boosting the energy sector 1.8%. These gains came as supply disruptions in Canada and Nigeria eased fears of the global supply glut. But Saudi Arabia said it plans to increase its output this year.
At Tuesday’s close, the Dow Jones Industrial Average jumped 222 points to 17,928, the S&P 500 rose 26 points to 2,084, the Nasdaq was up 60 points at 4,810, and the Russell 2000 added 11 points at 1,129.
The NYSE Composite’s primary exchange traded 855 million shares with total volume of 3.5 billion. The Nasdaq crossed 1.7 billion shares. On the Big Board, advancers outpaced decliners by 3.3-to-1, and on the Nasdaq, advancers led by 2-to-1. Block trades on the NYSE increased to 6,506 from 5,757 on Monday.
I often turn to the chart of the NYSE Composite when contrary signals threaten to mislead traders. Note that although a bullish golden cross was made recently, MACD is still negative and, as mentioned, volume is below average.
A double-top at 10,600 must be penetrated before the NYSE Composite can begin to attack the overhead supply between 10,600 and the high at 11,255.
On the chart of the S&P 500, we can clearly see that selling volume (red) exceeds the average volume line while lower-than-average buying volume has pushed up prices. A double-top exists at 2,116 and 2,111.
Conclusion
The downturn in early May and Tuesday’s sharp rally indicate an offset of buyers versus sellers. Low volume tells us that a full breakout, though possible, is unlikely since deep overhead exists on all major indices.
Support has been maintained, but signs point to a long, hot summer ahead. It is time to cash in gains and take a vacation from the market.
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.
