On Wednesday, investors endured another day of relatively quiet trading with the Dow Jones Industrial Average still unable to penetrate the 20,000 level.
Even though tax and regulatory cuts, along with an increase in infrastructure spending, seemed to indicate that next year will be highlighted by an increase in corporate earnings, investors seemed more focused on the upcoming holidays than on stocks. Volume has waned, and yesterday the Dow traded its narrowest range since 2013. All three major indices fell 0.2%. The Dow was led lower by a 1.8% decline in the price of Merck & Co., Inc. (NYSE:MRK), which fell 1.8% and Pfizer Inc. (NYSE:PFE) which lost 1.4%.
The Nasdaq felt a mild sting of selling from the biotechnology group. The iShares Nasdaq Biotechnology Index (ETF) (NASDAQ:IBB) fell 1.1%. And technology stocks were flat as a result of ground lost by Accenture Plc’s (NYSE:ACN) missing estimates and lowering guidance for this year. ACN fell 5.0%.
Crude oil (WTI) fell to $52.49 per barrel, off 1.5%, due to a government report that cited an increase in stockpiles by 2.3 million barrels last week vs. an expected decline of 2.3 million barrels. An increase in net imports was indicated as the reason for the faulty estimate.
At the close the Dow Jones Industrial Average fell 33 points to 19,942, the S&P 500 lost 6 points falling to 2,265, the Nasdaq closed at 5,471, a decline of 13 points, and the Russell 2000 lost 9 at 1,375. The NYSE’s primary exchange traded 698 million shares with total volume of 2.8 billion shares. The Nasdaq crossed 1.5 billion shares. On the Big Board, decliners led advancers by 1.2-to-1, and on the Nasdaq decliners led by 1.6-to-1. Blocks on the NYSE fell to 5,416 from 6,195 on Tuesday.
The Dow traded in the narrowest range in three years as interest volume fell until the close when a big selling block hit the tape. Block selling accounted for the spike in sales on Friday, which failed to deter a new closing high on Tuesday. Sentiment is moving to the bullish side, and MACD is still positive, though weakening. The first support for the Dow is at yesterday’s low at 19,942 and then at the support line at 19,520 drawn from November’s breakout base.
Conclusion: The consolidation from the advance from the December jump to the current pattern with its support at yesterday’s low is all part of a “continuation pattern.” This pattern is bullish and within a short time should result in an advance through the psychological barrier at 20,000.
Calling the Dow’s resistance at 20,000 a “psychological barrier” does not reduce its meaning. What technicians are indicating by this title is that there is no technical barrier of sellers to penetrate. Piercing the Dow’s line at 20,000 would be heralded around the globe and probably result in attracting new money from abroad. Bring them on, since the bull market is alive with new highs every other day or so.
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.
