S&P 500 Fails to Close Above Crucial Line

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Stocks recovered some of the Brexit losses Tuesday, with the Dow Jones Industrial Average gaining 1.6%, the S&P 500 advancing1.8% and the Nasdaq adding 2.1%.

The European bourses also gained, with the Stoxx Europe 600 up 2.6% after a two-day loss of more than 10% following the surprise outcome of the Brexit vote.

Energy stocks led the way higher, up 2.8% as oil prices jumped 3.3% to $47.85 a barrel. Notable gainers included Pioneer Natural Resources (NYSE:PXD), up 2.1%, Exxon Mobil Corporation (NYSE:XOM), up 2.3%, and Chevron Corporation (NYSE:CVX), up 1.3%. Mid caps Southwestern Energy Company (NYSE:SWN)and Marathon Oil Corporation (NYSE:MRO) soared 11.8% and 8.2%, respectively.

The financial sector was also strong, rising 2.5%, while technology and health care were each up 2%. Leading financial stocks included Bank of America Corp (NYSE:BAC) and Citigroup Inc (NYSE:C), which gained 4.3% and 5.1%, respectively.

Demand for lower-risk investments eased. The utility sector underperformed, gaining only 0.4%, and gold fell 0.5% to $1,317.90 an ounce.

At Tuesday’s close, the Dow Jones Industrial Average gained 269 points at 17,410, the S&P 500 rose 36 points to 2,036, the Nasdaq jumped 97 points to 4,692, and the Russell 2000 advanced 18 points to 1,107.

The NYSE Composite’s primary exchange traded over 1 billion shares with total volume of 4.3 billion. The Nasdaq crossed over 2 billion shares. On the Big Board, advancers outpaced decliners by 5.7-to-1, and on the Nasdaq, advancers led by 4-to-1. Block trades on the NYSE declined to 6,103 from 6,764 on Monday.

S&P 500 Chart
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Chart Key

The Brexit sell-off took out the important support line at 2,040 and the 200-day moving average at 2,021. Tuesday’s rally made an attempt to recover the 2,040 line but failed, halting at 2,036. The index did, however, close above the 200-day moving average. Tuesday’s volume was less than either Friday’s or Monday’s volume, and MACD is still on a sell signal, though now oversold.

Conclusion

Yogi Berra was right when he said, “It ain’t over till it’s over.”

The S&P 500’s failure to recover and close over the 2,040 line is crucial to a recovery. Above that line is a huge amount of overhead (i.e., potential sellers). Fibonacci numbers favor a full 61.8% retracement, which would terminate at about 1,942.

If the decline ends in that area, the market could be set up for a rally from a triple-bottom base. However, it may take the remainder of the summer to form such a base.

Traders should short or sell into rallies, but longer-term investors should hold solid stocks like today’s Trade of the Day, General Electric Company (NYSE:GE).

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/2016/06/sp-500-fails-close-crucial-line/.

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