On Tuesday, stocks gained preceding the results of one of the most fractious national elections in U.S. history. The Dow Jones Industrial Average and the S&P 500 rose 0.4%, the Nasdaq gained 0.5% and the Russell 2000 gained 0.2% as it appeared that whoever the winner, investors were satisfied that the associated uncertainties of the emotionally charged election are finally over.
“Live” controversial polling data showed that Hillary Clinton was ahead, and traders jumped on the news propelling volatile stocks higher. But pollsters were quick to point out that their data was based solely on projections rather than actual results — in the end, Donald Trump was the victor.
Ten of the eleven S&P sectors closed higher yesterday, with utilities and telecom services, both defensive sectors, leading at +0.7% and +0.6% respectively.
The Biotechnology sector gained 0.2%, as did the iShares Nasdaq Biotechnology Index (ETF) (NASDAQ:IBB).
At the close the Dow Jones Industrial Average gained 73 points at 18,333, the S&P 500 rose 8 to 2,140, the Nasdaq closed at 5,193, up 27, and the Russell 2000 rose 3 points to close at 1,195. The NYSE’s primary exchange traded 861 million shares with a total of 3.9 billion shares traded. The Nasdaq crossed 1.7 billion shares. On the Big Board, advancers outpaced decliners by 1.4-to-1, and on the Nasdaq, advancers led by 1.2-to- 1.
Following the rally from the June BREXIT low, the Dow industrials double topped in July (18,595) and August (18,366) and gradually fell in Channel Down with resistance at the 50-day moving average and a bearish resistance line (dotted red line).
A support line, beginning in August connecting with a reversal (up) in September, terminated on Monday at the rising 200-day moving average at 17,790. Yesterday’s higher close decisively broke the bearish resistance line and 50-day moving average (18,218) but has not exceeded the double tops of July and August. Volume is low, but yesterday MACD issued a clear buy signal.
The resistance line of a massive bullish Cup-&-Handle formed from the high in May and a series of highs beginning in September. That line was broken by higher-than-average volume on Monday, but reversed yesterday on equally high selling. MACD remains positive.
Conclusion: It’s best to not make decisions based on charts formed during highly emotional periods. Today’s charts of the DJIA and DJTA are examples of contrary thinking.
On the one hand, the industrial average looks bullish because of a breakout from a “channel down” and a successful test (thus-far) of its 200-day moving average. But buying is on low volume. The Dow transports broke from an eight-month Cup-&-Handle but suffered an inside reversal yesterday on higher-than-normal volume.
What to make of it? I don’t know. But the charts are useful in that they provide us with new support/resistance lines that are bound to be important trigger points for future positioning.
The election may be over, but many questions remain.
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.
