On Friday, stocks rebounded from the year’s worst sell-off, a 2% clobbering on Thursday that resulted from weak global economic data and a negative response to the Fed’s outlook. Buying was focused on banks and health care stocks, but technology stocks also did well. Banks recovered following a downgrade of some of the major houses after the close on Thursday.
At Friday’s close, the Dow Jones Industrial Average was up 67 points at 12,641, the S&P 500 gained 10 points at 1,335, and the Nasdaq rose 33 points to 2,892. The NYSE traded 1.6 billion shares and the Nasdaq crossed 1.1 billion. Advancers led decliners on both exchanges by about 1.3-to-1. For the week, the Dow was off 1%, the S&P 500 fell 0.6%, and the Nasdaq rose 0.7%.
Even though Friday’s rally was accompanied by high volume, breadth lagged and the major indices retraced less than half of Thursday’s crushing sell-off. Both the Dow and the S&P 500 appear to have faltered at almost precisely 61.8% of the retracement of the May high to the June low — a Fibonacci rebound.
Immediate resistance for the Dow is between the resistance line at 12,716 and its 50-day moving average at 12,735. The 200-day moving average at 12,369 and the line at 12,300 are strong areas of support. Thus, the trading range is wide with these lines marking the major range at 12,300 to 13,000.
Like the other indices, the Nasdaq collapsed through its 50-day moving average, but unlike the others, this index has formed a bearish resistance line, which connects the April, May and June highs and ends at about 2,940. This is now its major resistance line.
The major support for the index is at its 200-day moving average at 2,785, thus its trading range is much more restricted than the Dow’s or the S&P 500’s. Note the new stochastic sell signal generated on Thursday.
Conclusion: Despite Friday’s technical rebound, with very high volume due to a rebalancing of the Russell 2000 index, the immediate trends are now down. Thursday’s overwhelmingly negative breakdown, with volume down over volume up at almost 14-to-1 on the NYSE and 6-to-1 on the Nasdaq, tells us that the bears are now in charge again.
This could be another very volatile week starting with a decision by the Supreme Court on the president’s health care plan. And so rallies should again be viewed as selling opportunities until high volatility and the mayhem of June settle down.
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.
