On Monday, stocks rallied again, taking the Dow Jones Industrial Average to another new high for its 12th consecutive session. But, like in recent days, its advance was muted, with a gain of less than 0.1%. The S&P 500 rose 0.1%, boosted by a rally in the biotechnology sector, which also helped the Nasdaq to gain 0.3%.
President Donald Trump’s announcement that he will seek a $54-billion increase in defense spending sent Boeing Co (NYSE:BA) and Lockheed Martin Corporation (NYSE:LMT) higher. And his promise to delineate his infrastructure proposals sent Caterpillar Inc. (NYSE:CAT) leaping.
Since the trend was toward a “risk-on” approach, the utility sector swapped some of its gains for losses, as did other defensive groups like the telecommunications stocks. The selling of utilities was the result of profit-taking, following their best week since July. However, biotechnology stocks were strong with the iShares Nasdaq Biotechnology Index (ETF) (NASDAQ:IBB) jumping 2.9%.
Overall, however, Monday’s trading was relatively flat as investors waited for the president’s speech to Congress tonight and the hope that his programs will have a positive impact on corporate earnings.
At the close, the Dow Jones Industrial Average gained 16 points at 20,837, the S&P 500 rose 2 points to 2,370, Nasdaq gained 17 points at 5,862, and the Russell 2000 closed at 1,408, for a gain of 13 points. The NYSE’s primary exchange traded 840 million shares with total volume of 3.4 billion shares. The Nasdaq crossed 1.8 billion shares. On the Big Board, advancers outpaced decliners by 1.5-to-1, and on the Nasdaq, advancers led by 1.9-to-1. Blocks on the NYSE fell to 6,411 from 6,760 on Friday.
Friday’s and Monday’s reversals, with an attempt at a new high, maintained the momentum needed to keep the near-term breakout positive. Volume has not been supportive of a new break, nor has the MACD indicator.
The iShares Russell 2000 Index (ETF) (NYSEARCA:IWM) is bullish, but the SPDR S&P 500 MidCap 400 ETF’s (NYSEARCA:MDY) is more bullish. Note the strong up-trending 20- and 50-day moving averages of the IWM. The only “fly in the ointment” is the lack of supportive volume.
Conclusion: The U.S. stock market is very bullish. Even when it corrects, don’t look for much of a retracement. For example on the MDY there is solid support from 302 to 309, buoyed by higher-than-average volume during the period that the support zone was formed.
A further advance may depend on how the president’s message of new growth is perceived. But technically all is well. However, as noted on Monday, traders would be wise to take some of their gains since a correction is bound to occur; however, long-term investors should hold onto their gains and ride the bull to new heights.
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.
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