On Monday, light volume and a lack of news resulted in the fourth consecutive gain for the S&P 500. But concerns over China’s growth followed a release that the world’s second-largest economy had a large trade deficit last month. Traders also attributed the slow market to reluctance on the part of investors prior to the latest FOMC Policy Statement to be forthcoming today.
At the close, the Dow Jones Industrial Average gained 38 points at 12,960, the S&P 500 rose a fraction to 1,371, and the Nasdaq fell 5 points to 2,984. The NYSE traded just 643 million shares, and the Nasdaq crossed 355 million. Decliners were ahead on both exchanges by about 1.3-to-1.
After a three-day advance led primarily by financials and technology, and punctuated by an impressive reversal on Wednesday, stocks yesterday turned to the more defensive sectors. Utilities gained 1.1% advancing from a small triangle base at around 450 on the Dow Jones Utility Average. This mini breakout is within the confines of a powerful bull channel and confirms that solid money still seeks the safety and stability of slower growth with regular dividends.
A few commentators have expressed concern over the low numbers on the CBOE Volatility Index (VIX). They worry that with such complacency it is only a matter of time before the market turns sharply lower. But the VIX appears more at the beginning of a string of lower numbers than at the end.
For example, from December 2010 to June 2011, the index regularly traded under 20 while the market advanced. It wasn’t until July that the market began to tumble when the VIX suddenly rose from a low of 15.3 to a breakout of 25.
Conclusion: The market continues to exhibit the technical signs associated with a bull market. But perhaps even more important, the Fed members deny that another QE3 is in the works while at the same time devising new plans to inject bond money into the equity markets. As long as the Fed continues to pump funds into the “risk markets,” the risk of owning stocks rather than bonds decreases.
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.
