Yesterday, both the Dow industrials and the S&P 500 closed lower for the third straight day as investors’ showed concern over what could be a new round of European monetary failures with an immediate focus on Spain. Yields on the 10-year Spanish bond hit 5.81%, the highest since December.
ADP said that new applications for jobless benefits fell to the lowest level in almost four years. Today’s unemployment report with an estimated rate of 8.3% should confirm yesterday’s increase in jobs.
At the close, the Dow Jones Industrial Average fell 15 points to 13,060, the S&P 500 fell 1 point to 1,398, and the Nasdaq gained 12 points at 3,081. The Big Board traded 719 million shares with the Nasdaq trading 506 million. Decliners were ahead of advancers by about 1.3-to-1 on both exchanges.
On Thursday, I reviewed the support zones of the S&P 500 and Nasdaq. Now let’s turn to the Dow.
Technically the Dow is not quite as healthy as the other major indices. The high made on March 6 at 13,332 was followed by two unsuccessful bids for higher prices. The first was on March 26, and only made it to 13,269, and the next was on March 26, which also failed, making it to 13,297.
Thus, unless buyers surface next week and enter the market with gusto, investors are faced with a double-top at 13,332 and 13,297. A close below the 50-day moving average at 12,976 would confirm the double-top and most likely lead to an extended period of range-bound trading between 12,735 and current levels.
That’s the good news. The bad news is that if prices break below 12,735, a signal would be flashed that a bearish topping pattern has formed.
Conclusion: Bull markets are almost always confronted by these walls of price resistance. Prices often move ahead at a snail’s pace with many challenges to overcome. It may be tedious and it takes much faith and resilience to buy stocks in the face of adversity.
But those who have analyzed the price structure of this market believe that buying on consolidations is the correct and most profitable course of action.
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.
