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Major Breakout Could Take the Dow to 17,800

Industrials within 45 points of triggering new Dow Theory buy signal

U.S. stocks opened higher for the second day, buoyed by positive European markets. Biotech and technology stocks were strong throughout the day.

The S&P 500 rallied 0.7% to a new intraday and closing high. The Nasdaq jumped 1.6% for a three-session gain of 2.8%, helped by Apple (AAPL), Cisco (CSCO), Google (GOOG), Oracle (ORCL) and Qualcomm (QCOM). Defensive issues of the consumer staples, telecom services and utility sectors ended lower.

Construction spending in February met expectations, but the ISM Manufacturing Index for March, missed slightly at 53.7, where analysts had expected 53.9.

At Tuesday’s close, the Dow Jones Industrial Average rose 75 points to 16,533, the S&P 500 was up 13 points to 1,886, and the Nasdaq jumped 69 points to 4,268. The NYSE traded total volume of 3.3 billion shares, and the Nasdaq crossed 2.2 billion. Advancers outpaced decliners on both exchanges — by 2.6-to-1 on the NYSE and 3.1-to-1 on the Nasdaq.

SPX Chart
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Chart Key

A classic break from a bullish “W” and triple-top, supported by a fresh buy signal from MACD, resulted in a new intraday and closing high for the S&P 500. Breadth at about 3-to-1 is supportive of the breakout, but the relatively low volume is worrisome.

DJI Chart
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The Dow industrials shifted into high gear Tuesday and closed within 45 points of a confirmed Dow Theory buy signal. MACD flashed a new buy signal. If a breakout develops, the target would be about 17,800.

DJT Chart
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The Dow Jones Transportation Average broke to a new closing high and appears to be headed much higher. A break from a triple-top, supported by a pending buy signal from MACD, should shortly provide the evidence needed for Dow theorists to declare a major breakout.

Conclusion: The evidence is growing that a major breakout is about to occur. With a new intraday and closing high from the S&P 500 and a pending Dow Theory breakout on the verge of occurring, it appears that the bulls have the field and are prepared to run the ball much further. All that remains to complete the puzzle is a 45-point higher close by the Dow Jones Industrial Average to trigger a new Dow Theory buy signal.

In the face of political wrangling, threats of military action in Europe, and enough negative news to normally reverse markets into a downward spiral, stocks have ignored all of it and headed higher.

If the breakout is confirmed, the value of technical analysis is enhanced, since it is the only tool in the investor’s bag that has consistently pointed to higher prices. The value of its total objectivity is obvious when compared to the emotional spewing of negativity from the media that has kept the average investor out of the market. But those who have followed the positive path laid out by the charts, and stuck with their positions while adding to them on weakness, have done well.

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.

Article printed from InvestorPlace Media, https://investorplace.com/2014/04/daily-stock-market-news-major-breakout-take-dow-17800/.

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