Stocks opened lower Wednesday but managed to make up most of the losses and closed mixed. Buyers of blue chips did, however, manage to push the Dow Jones Industrial Average to a new three-month high while technology stocks slipped to a loss for the day. Most of the gains in blue chips were attributed to a slightly higher session in Europe.
At Wednesday’s close, the Dow was up 7 points to 13,175, the S&P 500 gained 1 point at 1,402, and the Nasdaq lost 5 points to end the session at 3,011. The NYSE traded 637 million shares and the Nasdaq crossed 415 million. On the Big Board, advancers were slightly ahead of decliners, but on the Nasdaq, decliners led by 1.3-to-1.
The S&P 500 is approaching the closing high of May 1 at 1,406, and the more important closing high of 1,419 on April 2. But even as it nears these significant tops, note that volume has declined from below average to far below average and breadth is barely on the plus side. Also note that the RSI is flat while the bull channel is in a 45-degree advance.
The S&P 100 is a subset of the S&P 500. It includes 100 leading stocks with listed options, and its members tend to be the largest and most established companies in the S&P 500. It has exceeded its closing high of May at 639 but not the closing high of April at 645. Like the S&P 500, it has a bull channel, but its slope is even steeper than the 500’s, while its RSI is also flat.
Conclusion: With little resistance from public sellers, institutions appear to be pecking away at the best quality stocks. However, the lack of volume suggests a minimum commitment on their part.
Note that both charts above have a flat RSI, signaling that despite the slope of the bull channels, the current high-quality buying looks more like “portfolio window dressing” rather than serious long-term buying.
As these indices approach the April high, bear in mind that back in May, after the second attempt at a new high, the S&P 500 plunged to a 10% correction. Perhaps the low volume and mediocre commitment are all part of the summer doldrums, but this pattern is not encouraging for the bulls, and so it is best to remain on the sidelines.
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.
