Dow Hanging On to 50-Day MA by a Thread

by Sam Collins | February 24, 2014 2:45 am

The major stock indices closed mixed to lower on Friday, ending a two-week winning streak for the S&P 500. Stocks appeared directionless, despite more positive reports for the emerging markets and quarterly earnings that have generally exceeded expectations.

Weather has put a damper on sales, and that is what is taking the blame for a sluggish stock market. But the Federal Reserve’s cutback on its stimulus plan also had an impact on performance.

A report indicated that sales of previously owned homes fell more than had been forecasted in January. But The Wall Street Journal reported that “cash continues to flow into U.S. stocks-focused mutual funds — a net $1.7 billion in the week ended Wednesday.”

At Friday’s close, the Dow Jones Industrial Average was off 30 points at 16,103, the S&P 500 fell 4 points to 1,836, and the Nasdaq was down 4 points at 4,263. The NYSE’s primary market traded 13 million shares with total volume of 3.4 billion shares. The Nasdaq crossed 2.1 billion shares. Despite the small losses, there were more advancers than decliners on both major exchanges at a ratio of about 1.2-to-1.

For the week, the Dow fell 0.3%, the S&P 500 was off 0.1%, and the Nasdaq slipped 0.5%.

Dow Chart
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Chart Key[1]

Overall, the Dow industrials are still moving forward in a powerful bull channel. However, near term they have hesitated after achieving the partial victory of holding on to a perch just above the 50-day moving average (MA). The big question is: With MACD rounding and receding, can the index hold it long enough for the broad-market advance to pull it forward and challenge the December high?

DJT Chart
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The Dow Jones Transportation Average led for much of last year, but January’s pullback threatened the bullish support line of its narrow bull channel, and now, like the industrials, it is having a difficult time holding on to its 50-day moving average.

Conclusion: The Nasdaq was able to punch through to another 13-year high on Friday, but closed on a minus, and thus negated the new high. The S&P 500 is struggling to hold on to a launching pad, and today we see the tenuous position of the Dow stocks.

Even though the bulls appear to be hanging on to their position by the hair of a tail, they are hanging on — and in the face of one negative blast after another. That’s good news. But only time will tell if they can muster enough buyers to punch through the S&P 500’s triple-top (see Friday’s Daily Market Outlook[2]).

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here[3].

For a list of this week’s economic reports due out, click here[4].

  1. [Image]:
  2. see Friday’s Daily Market Outlook:
  3. click here:
  4. click here:

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