True Broad Market Index Yet to Break to Higher Ground

As the Labor Day weekend approached, stock volume continued to drop as interest in investments waned. The indices ended Wednesday flat with slight gains on the lowest full-day volume of 2014.

However, the S&P 500 managed its 31st closing high of the year, if only by a gain of less than a point. The Dow industrials traded in their third narrowest range of the year, just 44 points between the high and low. And there was a slightly defensive tone to the market with utilities and telecom stocks gaining ground.

Tiffany (TIF) was up 1% and The Michaels Companies (MIK) jumped 9.3% after the companies reported better-than-expected quarterly results and raised their outlooks for the year.

U.S. Treasury bonds closed at their highs, with the yield on the 10-year note falling to 2.36% and the 30-year at 3.11%. New Russian incursions into Ukraine were said to be the reason for a rush to U.S. bonds, along with the very low rates of bonds from Germany and the U.K.

At Wednesday’s close, the Dow Jones Industrial Average rose 15 points to 17,122, the S&P 500 was flat at 2,000, the Nasdaq fell 1 point to 4,570, and the Russell 2000 fell 2 points to 1,173. The primary market of the NYSE traded less than 500 million shares with total volume of 2.4 billion shares. The Nasdaq crossed 1.4 billion shares. On both major exchanges, advancers exceeded decliners by just under 2-to-1.

NYSE Chart
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Chart Key

Although the focus of most investors has been on the Dow industrials and the S&P 500, these indices are still composed of a fixed number of securities. The broad market is best indicated by the NYSE Composite, even though it is hardly ever mentioned by the financial press. Called the “Big Board,” the index is composed of 1,867 stocks, of which 349 are of non-U.S. companies.

Despite new highs in the Dow industrials, S&P 500 and Nasdaq, the NYSE is still 68 points from a new high. The chart, however, shows a powerful bull channel with the index above its initial support — the 50-day moving average at 10,919.


Until the Big Board establishes a new high, I recommend a cautious but positive outlook. I would also be more aggressive if the Dow transports would confirm the industrials’ breakout with a new Dow Theory buy signal.

Nevertheless, as the summer draws to a close, the market appears strong enough to, in time, overcome these minor concerns and head to higher ground.

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.

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