Sidelines Are the Safer Bet Right Now

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The major indices pushed against resistance on Wednesday, and slugged it out to another day of record highs. The Dow rose 0.2% to its 33rd record high of the year, and the S&P 500 rose 0.4% to its 48th high in 2014.

The small-cap Russell 2000 rose 0.9%, and the Nasdaq gained 0.4%. However, neither is close to a new all-time high. The Russell’s high is a double-top at 1,214 from March and July, and the Nasdaq’s top is at 5,133, made more than 14 years ago.

There was no news to push the more speculative groups ahead except a generally stronger U.S. economy compared with the rest of the world.

The materials sector led Wednesday, up 1.5%, with strong performance in steelmakers and miners. The Market Vectors Steel ETF (SLX) rose 2.4%, and the Market Vectors Gold Miners ETF (GDX) gained 0.3%.

Crude oil futures rose 0.7% to $67.38 a barrel, but are still down almost 38% from their June 20 high.

November payrolls increased by 208,000, which was below expectations of 223,000. The Institute for Supply Management’s nonmanufacturing purchasing managers index rose to 59.3 last month, where 57.6 was expected.

At Wednesday’s close, the Dow Jones Industrial Average was up 33 points at 17,913, the S&P 500 rose 8 points to 2,074, the Nasdaq gained 19 points at 4,774, and the Russell 2000 was up 11 points at 1,179.

The NYSE’s primary market traded 776 million shares with total volume of 3.6 billion. The Nasdaq crossed 1.7 billion shares. On the Big Board, advancers outpaced decliners by 1.8-to-1, and on the Nasdaq, advancers were ahead by 1.6-to-1.

MDY Chart
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Chart KeyThe SPDR S&P MidCap 400 ETF (MDY) closed within a fraction of the upper band of a narrow resistance zone at $258 to $264. A punch through that line would put pressure on MDY to hit a new high. But declining volume, lagging momentum and a sluggish MACD argue against a high-volume breakout.

IWM Chart
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In Wednesday’s Daily Market Outlook, I examined the chart of the iShares Russell 2000 Index ETF (IWM) from a different perspective. I ignored the support line from the June high at $120 to the August high, finally acting as support for a “horn.”

If IWM breaks above $120, that support line, as well as the 200-day moving average at $114.25, must hold any pullback.

Like MDY, lagging volume, negative momentum and a bearish MACD are holding back the advance.

Conclusion

Although this is the second consecutive day that I have examined these two more speculative charts, this is where the action is. Thus far, there has been little in the way of buyer enthusiasm to suggest that a breakout is about to occur.

However, if it does, despite my inclination to be very cautious when approaching major resistance zones, I would greet a bullish break with enthusiasm. For now, though, the sidelines are a safer bet.

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/2014/12/daily-market-outlook-sidelines-safer-bet-right-now/.

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