Markets Are Looking to the Nasdaq to Lead

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On Wednesday, the major stock indices closed higher, despite a decline in the healthcare sector. The S&P 500 gained 0.3%, the Dow Jones Industrial Average rose 0.5%, and the Nasdaq jumped to another new high, up 0.2%, its seventh consecutive closing gain.

The healthcare group was gaining until President-elect Donald Trump’s criticism of the pharmaceutical company’s price structure, voicing support for competitive drug price bidding. The iShares Nasdaq Biotechnology Index (ETF) (NASDAQ:IBB) fell 3.0%, falling immediately following his remarks.

However, gains in energy stocks offset the declines in biotechs as crude oil prices rose 2.8%. The February contract closed at $52.25 per barrel, its best day in over a month.

The dollar index, which measures the buck vs. 16 other currencies, fell 0.3%. However, the benchmark 10-year Treasury bond rallied, taking its yield lower to 2.368% from 2.379% on Tuesday. Gold rose 1% to $1,195.60 per ounce, its highest close in six weeks.

At the close the Dow Jones Industrial Average gained 99 points at 19,954, the S&P 50 rose 6 points to 2,275, the Nasdaq closed at 5,564, up 12 points, and the Russell 2000 closed at 1,373 for a gain of 2 points. The NYSE’s primary exchange traded 892 million shares with total volume of 3.6 billion shares, and the Nasdaq crossed 1.9 billion shares. On the Big Board, advancers outpaced decliners by 2.2-to-1, and on the Nasdaq advancers led by a slim margin, of 1.2-to-1. Blocks on the NYSE increased to 7,460 from 6,624 on Tuesday.

Russ 2000 (IWM) consolidating
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Markets Are Looking to the Nasdaq to Lead

While the Nasdaq vaulted to its seventh consecutive closing high (see chart on Jan. 10), the small-caps as illustrated by the iShares Russell 2000 Index (ETF)’s (NYSEARCA:IWM) chart are consolidating following the jump through $126 in November. The consolidation is in the form of a descending right triangle with support at $134 and resistance at $137. Note the declining volume, which usually means that the consolidation will last a bit longer.

Conclusion: The overall trend is decidedly up, with the hope that the Nasdaq will lead the other senior indices into open territory. The IWM’s support at 134 is holding up, that’s positive, since the small caps are attracting buyers and could again lead the market out of its current period of consolidation.

Correction: As pointed out by one of our readers, we are in a secular bull market, meaning very long-term advance, not a cyclical bull market. And “Risk On” is the current theme. Thanks for your input.

Today’s Trading Landscape

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For a list of this week’s economic reports due out, click here.


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