U.S. stocks rose modestly on Thursday as investors continued to voice concerns over Wednesday’s drubbing of Chinese stocks. Even though the Shanghai Composite jumped 5.8% prior to the opening in New York, it was unsettling that Chinese regulators are considering taking criminal action against “hostile short-sellers” and prohibited sales from large stockholders.
However, after eight losses in the past 10 days, some investors voiced relief that the Shanghai Composite jumped in response to regulators’ efforts. Chinese stocks had their best day in six years.
The NYSE Composite jumped 1.6% in early trading, but the gains were short-lived as the index closed just 0.5% high. The Dow Jones Industrial Average finished the day up 0.2%.
Apple Inc. (AAPL) fell 2%. The Wall Street Journal reported that this was partially due to “concern that China’s stock-market tumble has destroyed a significant amount of its citizens’ wealth.” Sales from Greater China accounted for 29% of Apple’s total revenue in fiscal Q2.
The chief investment officer of U.S. Trust, Chris Hyzy, said investors should focus on the U.S. housing group for new purchases. See the Trade of the Day for my recommendation in SPDR S&P Homebuilders (ETF) (XHB).
In other U.S. corporate news, Alcoa Inc (AA), the traditionally first earnings report of the quarter, reported better-than-expected revenues but missed on earnings. The stock rose 0.9% in active trading.
J B Hunt Transport Services Inc (JBHT) gained 2.2% after a ratings increase, and the Dow Jones Transportation Average, which contains JBHT, rose 0.6%. Prior to Thursday’s rally, the transports were down more than 14% from their Nov. 28 high at 9,310.
Initial jobless claims rose 15,000 to a seasonally adjusted 297,000 in the week ending July 4, above the 275,000 economists expected and the highest since February.
Crude oil futures gained 2.2%, closing at $52.78 a barrel. And gold futures fell 0.4% to $1,159 an ounce. The 10-year Treasury note’s yield jumped to 2.30% from 2.21% on Wednesday.
At Thursday’s close, the Dow Jones Industrial Average gained 33 points at 17,549, the S&P 500 rose 5 points to 2,051, the Nasdaq was up 13 points at 4,922, and the Russell 2000 advanced 5 points to 1,234.
The NYSE’s primary exchange traded an above-average 827 million shares with total volume of 3.4 billion shares. The Nasdaq crossed 1.8 billion shares. On the Big Board, advancers outpaced decliners by 1.4-to-1, and on the Nasdaq, advancers led by 1.7-to-1.
Due to the overall impact of Greece’s newest proposal, which is being described as meeting the “longstanding demands by creditors,” today I offer for your study just the chart of the S&P 500.
In late June, the S&P 500 broke its intermediate trendline at about 2,110. And on Tuesday, it smashed through its 200-day moving average, now at 2,055.87.
Additionally, as correctly pointed out by technician Michael Ashbaugh, the violation of the 200-day moving average was accompanied by two negative breadth violations, one on June 29 by 20-to-1 and the other on Tuesday by 15-to-1. Ashbaugh also points out that the breadth violations accompanying a trendline breakdown plus a violation of the 200-day moving average would normally be interpreted as a “signal of a meaningful trend shift.”
Conclusion
Despite the negative implications of three technical indicators, I agree with Ashbaugh’s take: Since the breakdown occurred during a break in China’s markets, a pending new proposal from Greece and the worst “glitch “in NYSE trading history, it’s not time to call a major trend shift to a bear market.
And we have one other tool that is unique — our 17-month moving average. Our most reliable chart has not yet flashed a sell signal.
The S&P 500 monthly chart’s simple price line must cross the 17-month moving average now at 2,009.74. Since the index is more than 41 points from that important line, we will presume that even though the intermediate trend is now “down,” the bull is still in the meadow.
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.
