Thursday morning, the market shifted its focus from Europe and opened higher following a jobless claims report that was slightly lower than expected. But following a round of profit taking, traders shifted east again, to France. It seems reports of a Standard & Poor’s downgrade of French debt resulted from a “technical glitch” on its part and that the bonds retain the triple-A rating remains unchanged.
The Dow Jones rose 0.96%, the S&P 500 gained 0.86% and the Nasdaq was up 0.13%. Volume on the NYSE fell to 904 million shares and to 522 million on the Nasdaq. Advancers led decliners at just under 1.9-to-1.
Down volume on Tuesday exceeded up volume by 18-to-1 on the Nasdaq and more than 30-to-1 on the NYSE. This is very high negative on balance volume and compares with other big days down like Oct. 31 and Nov. 1.
What is notable about each of the indices’ charts is that each has broken its 200-day moving average twice. This is a nasty sign for the bulls since the second failure resulted in a lower high and is accompanied by a “sell” signal from the stochastic. Despite the negative, the index has managed to barely hold above its support line at 1,220. Thus the current trading range is 1,220 to 1,275.
Like the S&P 500, the DJIA fell for the second time through its 200-day moving average, and although the decline was not as deep as the 500’s, it failed to recover yesterday. Its trading range is now 11,650 to 12,200. And its stochastic also issued a “sell” signal along with its MACD (not shown).
Like the other indices, the Nasdaq, too, fell through its 200-day moving average, but its fall is deeper and much like the 500’s. On Thursday, its intraday low at 2,601 almost touched the support line of its trading range of 2,600 to 2,725. Nasdaq’s stochastic, MACD and momentum indicators have each turned negative. (Option trades are a great way to play this bear market.)
Conclusion: Volatility has been high because of the various European crises, and despite yesterday’s recovery, the CBOE Volatility Index (VIX) still is in a high danger zone at 32.81. Each index has failed its second test of the important 200-day moving average. But each index also has failed to break its near-term support line and is trading in a narrow zone between the bearish resistance line (black dash sloping line) and its support line (horizontal black dash line). Thus, the bears still are in charge. A break through the support lines of each index would most likely result in a challenge first to their 50-day moving averages (blue line), and then to the October lows.
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.
