Major Breakout Occurring While Public Cries Wolf

by Sam Collins | May 30, 2014 2:49 am

Stocks moved higher Thursday with the S&P 500 hitting its 13th all-time high of 2014 despite a weaker-than-expected GDP report. The Q1 GDP revision showed a 1% contraction versus an expected decline of 0.5%. But following a lower opening, stocks rallied and the S&P 500 closed at another high. The technology sector drew strength from Apple (AAPL[1]), which was up 1.8% following an announcement it will purchase music streaming and audio equipment company Beats for about $3 billion. The biotech sector was also strong with iShares Nasdaq Biotechnology (IBB[2]) gaining 0.6%. But volume was the lowest of the year. Floor traders attributed the light volume to a lack of sellers. One was quoted by The Wall Street Journal saying, “There is no reason to sell stocks if the Fed is going to be on your side.” At the close, the Dow Jones Industrial Average rose 66 points to 16,699, the S&P 500 gained 10 points at 1,920, and the Nasdaq was up 23 points at 4,248. The NYSE’s primary market traded just 532 million shares with total volume of 2.7 billion shares. The Nasdaq crossed 1.7 billion shares. On the Big Board, advancers outpaced decliners by 2-to-1, and on the Nasdaq, advancers were ahead by 1.4-to-1. SPX Chart Click to Enlarge Chart Key[3] Despite the low volume, the S&P 500 is sustaining a major breakout. It is supported by a trailing 20-day moving average at 1,888.07 and 50-day at 1,873.29, and the advance from a triple-top. RUT Chart Click to Enlarge While the heavy-duty blue chips are moving to new highs, the small caps are also plowing ahead — though not yet to new highs. The Russell 2000 closed above its 50-day moving average at 1,137.83, with strong support at the conjunction of the broken bearish resistance line and 200-day moving average at 1,120. RUT Chart Click to Enlarge Despite what appears to be a small daily advance for the Russell 2000, this chart shows that there is plenty of volatility for traders. The early morning fall to the low of the day at 1,134.78, then up to the high at 1,141.35, took place in less than 90 minutes. Conclusion: In spite of the disbelief of the majority of the investing (and non-investing) public, a major breakout is occurring among the highest-quality stocks. But the low volume is also providing traders with the daily volatility they require to make profitable day trades. There is something for everyone in this bull market. It’s just too bad that most of the public is unaware of the potential gains that usually follow a solid technical breakout.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here[4]. For a list of this week’s economic reports due out, click here[5].

  1. AAPL:
  2. IBB:
  3. [Image]:
  4. click here:
  5. click here:

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