On Wednesday, the big-cap stocks lagged, but the slack was picked up by the mid- and small-caps. The Dow Jones Industrial Average fell 0.2%, the S&P 500 squeaked out a gain of 0.1%, but the Nasdaq rose 0.4% and the Russell 2000 gained 0.3%.
The technology-heavy Nasdaq has risen in 13 of the last 16 sessions, and the Russell 2000 scored its sixth-straight gain. The Nasdaq was again pushed higher by the biotechnology stocks. The iShares Nasdaq Biotechnology Index (ETF) (NASDAQ:IBB) gained 0.8%.
The S&P 500 was boosted by a gain of 1.2% in energy shares, which tracked a larger-than-expected decline in crude stockpiles. The shortage resulted in a gain of 2.4% for WTI crude oil, which closed at $49.51. The consumer discretionary sector took second place of the 500’s sectors with a gain of 2.1%. That gain was due to a 2.1% advance in the price of Amazon.com, Inc. (NASDAQ:AMZN), up $18.32 to $874.32 per share.
At the close, the Dow Jones Industrial Average fell 42 points to 20,659, the S&P 500 gained 3 points to close at 2,361, the Nasdaq gained 22 at 5,898, and the Russell 2000 closed at 1,372, a gain of 4 points. The NYSE’s primary exchange traded 727 million shares with total volume of 3 billion shares. The Nasdaq crossed a total of 1.7 billion shares. On the Big Board, advancers outpaced decliners by 1.9-to-1, and on the Nasdaq, advancers led by 1.6-to-1. Blocks on the NYSE fell to 6,086 from 6,544 on Tuesday.
The SPDR S&P Midcap 400 ETF (NYSEARCA:MDY) illustrates the battle that is taking place at the heart of the market. Mid-cap stocks are rebounding from Monday’s low of 303.85 and attacking the 50-day moving average, currently at about 311. A support zone exists at 303.85 to 309.59, and a failure to successfully pierce the 50-day simple moving average could still maintain support at that price band.
Conclusion: Unlike the Dow Jones, the S&P 500 and the Nasdaq, which have held above their respective 50-day moving averages, the mid- and small-caps have diverged, with the small-caps holding and the mid-caps breaking the key moving average. This represents what could turn out to be a serious divergence since it was the small-, plus the mid- caps together, that led the market through much of the extended advance of the bull market.
Therefore, focus on the 50-day moving average of the MDY for an “all-clear” penetration, or a “yellow warning flag” if prices turn down from the key blue line.
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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