During the first 70 minutes of trading yesterday, the Dow Jones Industrial Average (DJI) gained almost 100 points and, at that point, everyone could have gone home or to the beach.
Yesterday, all 10 S&P sectors had solid gains, but there was little to explain why and the volume on the NYSE was one of the lowest of the year.
Crude oil was higher, and that helped the energy stocks, which were up 1.3%. And financials recovered some of the losses of last week, rising 1.4%.
Technology stocks led early in the session, but gave back much of their gains and only gained 0.7% for the day. Nasdaq (NASD) underperformed the other indices for the first time in two weeks.
The Wall Street Journal attributed some of the gains to money managers making last-minute moves at the end of Q2. And there was evidence of some “window dressing” as favorite institutional stocks like Hewlett-Packard (HPQ) and Merck (MRK) led the Dow’s gainers.
There are several important reports to come this week. Some will appear on Thursday, since the exchanges are closed on Friday for Independence Day. They include the important June employment report and factory orders.
At the close, the Dow had gained 91 points to 8,529, the S&P 500 (SPX) was up 8 points to 927, and the Nasdaq rose 6 points to 1,844.
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The NYSE traded just over 1 billion shares, with advancers over decliners by 8-to-5. Nasdaq traded 632 million shares, but decliners were ahead by 7-to-5.
August crude oil closed at $71.49 a barrel, up $2.33, and the Energy Select Sector SPDR (XLE) gained 45 cents at $48.34.
August gold fell 30 cents to $940.70 an ounce as the dollar inched higher, and the PHLX Gold/Silver Index (XAU) fell 16 cents to $143.64.
What the Markets Are Saying
Even though the S&P 500 gained almost 1% yesterday, the Nasdaq, the leading index of the last month, faltered and had a tough time making headway.
Those who use the candlestick method of charting will note a “doji” in the Nasdaq. This occurs when the open and close are about the same.
According to Chris Burba at S&P, the implication is that “after a powerful advance in the prior three days, the bulls lacked the conviction to extend gains today. It indicates that the uptrend has been halted.”
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A close by the Nasdaq under yesterday’s low of 1,825.03 would amount to a reversal since it would violate the 20-day moving average with the next target being the 50-day moving average at 1,758. And it would set up Nasdaq for a test of the May double-bottom at around 1,675.
The Dow and the S&P 500 are now moving into some areas of heavy overhead. And with the lowest volume of the year supporting the buyers, it is very unlikely that the bull will make much more headway.
But longer-term the trend is up, so pullbacks should be used by investors as an opportunity to pick up shares at better prices. Traders, however, should try to capture some quick trading gains from the short side of the market.
Today’s Trading Landscape
Earnings to be reported include: Exfo Electro-Optical Engineering, Investors Real Estate, Park Electrochemical, Schnitzer Steel Industries, Sealy Corp. and Synnex Corp.
Economic reports due: ICSC Chain Store Sales Index for June 27, Redbook Retail Sales Index for June 27, April S&P/Case-Shiller Home Price Index, June Chicago PMI, June Conference Board Consumer Confidence and ABC/Washington Post Consumer Confidence for June 27.
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Sam Collins is a registered, fee-based portfolio manager who may be contacted at samailc@cox.net. You can also check out an archive of his most recent market outlooks.
