Financial, telecom and energy stocks enabled the major indices to overcome early weakness yesterday and end the day in the black. But despite the gains, the 30 Dow blue chips still did not overcome the barrier at 13,000 that has held them back since April. Energy stocks continued higher as crude oil surged 1.5% to a new nine-month high at over $108 a barrel. Technically all indices are in a powerful uptrend, but can the advance continue much longer?
At the close, the Dow Jones Industrial Average gained 46 points and made a multi-year closing high at 12,985, the S&P 500 gained 6 points at 1,363, and the Nasdaq was up 24 points at 2,957. Volume on the NYSE totaled 763 million shares, and on the Nasdaq volume was 458 million shares. Advancers exceeded decliners by about 2.5-to-1 on both exchanges.
There is a Wall Street saying, “Don’t sell a dull market short.” Mark Hulbert points out that last year on the Dow there were 81 days of 252 when there was a 200-point difference between the intraday high and the intraday low. And what a wild ride it turned out to be — a real stomach churner. Contrast that to this year when, after almost two months, there has been only been one such day and the market has advanced throughout the entire period.
With the CBOE Volatility Index below 18 (complacent), it looks like there will be more boring days ahead — and that is good for the bulls. Long-term volatility studies show that stocks do better when VIX readings hold below 20 for extended periods.
Finally, the Dow Jones Transportation Index did reverse upward yesterday, gaining 36 points, closing at 5,162, and flashing a Collins-Bollinger Reversal (CBR) buy signal (see yesterday’s Daily Market Outlook for a chart). However, in order for the signal to be valid, the index must close above its previously violated 50-day moving average at 5,193.
The major indices have edged their way to the top of resistance zones. But the advance has not been because of large blocks of buyers, but instead the absence of large sellers. The S&P 500 is stuck within the 1,356 to 1,371 trading range, but since boring is bullish, the market still points higher and we should buy on pullbacks.
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.
