On Friday, U.S. stocks rallied following an upside reversal on Thursday that together almost overcame Wednesday’s 1.8% loss in the Dow Jones Industrial Average and the S&P 500. At Friday’s closing bell, both major indices ended the week with a modest loss of 0.4%.
On Friday, both the Dow Jones and the S&P 500 rose 0.7% while the Nasdaq and the Russell 2000 gained 0.5%. The climb back up was led by the industrials (+1.4%), energy (+1.2%) and financials (+0.8%).
Crude oil boosted an advance in the energy sector as WTI jumped 2% to $50.33 per barrel. The jump followed a statement by Russia and Saudi Arabia that there was a possibility of both extending the time frame of a cut in crude production but also increasing the size of the cut itself.
At the close, the Dow Jones Industrial Average gained 142 points at 20,805; the S&P 500 gained 16 points to close at 2,382; the Nasdaq closed at 6,084 for a gain of 29 points; and the Russell 2000 rose 6 points at 1,367. The NYSE’s primary exchange traded over 1 billion shares with total volume of 3.8 billion shares, and Nasdaq crossed 1.9 billion shares. On the Big Board, advancers led decliners by 3-to-1, and on the Nasdaq, advancers led by 1.8-to-1. Blocks on the NYSE fell to 7,598 from 8,345 on Thursday.
Stocks have become volatile following a period of lower-than-average volume for three months, and almost a record low reading on the VIX (Fear Index). Then on Wednesday that pattern was broken with a sell-off that broke the first levels of support of many of the “most-watched” indices. But on Thursday the indices reversed, led by the S&P 500’s positive intraday action. On Friday bargain-hunting continued, and the index closed above its 50-day moving average at 2,370. But volume on the S&P 500 is still relatively low compared to Wednesday’s high volume sell-off, and MACD hardly budged from Wednesday’s low reading.
Conclusion: Despite Thursday’s reversal and a modest follow-through on Friday, the pressure is still on the bulls to bring in buyers that will conclusively drive the major indices to new highs. Friday’s breadth, at a positive 3-to-1, is an acceptable indicator for the reversal of a minor breakdown, but a major break demands positive breadth of 5-to-1 or more to drive through to new highs.
Buyers should stick with high-quality stocks with relatively low volatility. My Trade of the Day, Wal-Mart Stores Inc (NYSE:WMT) is a big-cap, blue chip that almost demands attention from buyers, but only at the right price.
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Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
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