Despite higher crude oil and gasoline prices and increasing tensions in the Middle East, stocks continued to plod to new highs last week. The S&P 500 advanced to its highest level in 10 months, and the Dow industrials were at their highest in four years. The advance was mostly confined to technology, utilities, health care and energy. The U.S. dollar fell to a new two-year low versus a basket of currencies and was especially weak against the euro, which closed at about $1.345.
At the close, the Dow Jones Industrial Average fell 2 points to 12,983, the S&P 500 rose 3 points to 1,366, and the Nasdaq gained 7 points at 2,964. The volume on the NYSE was the fourth lowest of the year at just 640 million shares. And the Nasdaq traded 394 million shares. Advancers and decliners were essentially break-even on both exchanges.
Last week’s market action was choppy, but each index managed to achieve a new high. The overall tape action, though boring, achieved decent leadership rotation with the financials and technology stocks leading one day followed by the less aggressive stocks the next, like the drugs, utilities, etc. Volume remains low and the CBOE Volatility Index has remained below 20, which indicates that there is more of the same to come.
Of the major indices, only the Nasdaq has made a clear break higher, but the Dow Jones Transportation Index, which we covered on Thursday, is far from a new high. In order to have an official Dow Bull Market, the transports will have to break through its January high at 5,426, the July high at 5,500, and then the June high at 5,577. It made no further progress on Friday, although its intraday high did penetrate its 50-day moving average at 5,198 but failed to hold it.
Despite its new intraday high above 13,000 on both Tuesday and Friday, the Dow industrials have yet to close above that psychologically important number. In fact, 13,000 has little technical significance, but the next barrier, the peak of May 2008 at 13,136, has great significance.
The S&P 500 still resides south of the 10-month resistance number at 1,371. Despite its overbought condition the stochastic issued a new buy signal on Friday, and so perhaps early this week we will finally see the S&P 500 close above 1,371, which also happens to be its peak number from June 2008.
Conclusion: Despite the lack of high volume and volatility, the market continues to plow ahead. And as noted last week, don’t sell a dull market short, but buy into any pullbacks of 3% to 5%.
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.
