The Dow Jones Industrial Average led the market higher on Tuesday, but not by much as the senior index gained only 0.14%. Nevertheless, it was the Dow Jones’ eighth consecutive session of gains — its longest winning streak in three years.
Other indices were at a small deficit as a tepid batch of earnings, a downturn in the price of oil, and general low-volume malaise dominated trading. European bourses closed lower due to a slowdown in Germany’s July ZEW Economic Sentiment Survey and a cut in the U.K.’s 2016 projected growth rate. The CBOE Volatility Index (VIX) fell to 11.97, its lowest level in a year, indicating a lack of fear on the part of buyers.
Energy stocks were lower following a 1.5% decline in crude oil to $44.67 per barrel on August contracts. Halliburton Company (NYSE:HAL) fell 1.4%, and Baker Hughes Incorporated (NYSE:BHI) was off 2.4%. But more defensive stocks showed strength yesterday, indicating that some fear still exists among investors at current levels. Healthcare stocks were led by Johnson & Johnson (NYSE:JNJ) which rose $2.11 to $125.25, and thrust the Dow Jones to a new high.
Netflix, Inc. (NASDAQ:NFLX) fell 13.1% after reporting that subscriber growth for Q2 missed forecasts. And Oracle Corporation (NYSE:ORCL) and Microsoft Corporation (NASDAQ:MSFT) fell 1.34% and 1.51%, respectively — though the latter recovered in Tuesday’s after-hours trade thanks to Microsoft’s Q4 earnings beat.
Lastly, gold (August contracts) rose 0.23% to $1,332.30 while the dollar rose 0.5% against a basket of six currencies.
At the close, the Dow Jones Industrial Average rose 26 points to 18,559, the S&P 500 fell 3 at 2,164, the Nasdaq closed at 5,036, down 19 points, and the Russell 2000 closed at 1,200, down 7 points. The New York Stock Exchange’s primary exchange traded 755 million shares with total volume of 3 billion shares, and the Nasdaq crossed 1.7 billion shares. On the Big Board, decliners outpaced advancers by 1.4-to-1, and on the Nasdaq, decliners led by 1.9-to-1. Block trades on the NYSE declined to 4,768 from 5,011 on Monday.
Like the chart on the NYSE Composite Index we discussed yesterday, the S&P 500 has sustained a meaningful breakout. Subtracting the February closing low at 1,830 from the former resistance line at 2,100, we have a product of 270, which when added to 2,100 gives an approximate target of 2,370.
Conclusion
That said, don’t borrow for a jump in on margin quite yet. The S&P 500 is overbought and due for a mild pullback. Its MACD is very overbought and volume is declining, a recipe for an adjustment. The first meaningful support is at 2,120, the June high, while a Fibonacci price retracement of 40% from the June low to the July high renders support at 2,100.
With no resistance, stocks have jumped into uncharted territory, and the breakout is confirmed.
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.
