Traders’ Best Bet is to Stand Aside

On Friday, stocks ended a holiday-shortened week with a gain. The Dow Jones Industrial Average jumped 2% for the week, making it the blue-chip index’s best weekly gain in almost six months.

The recovery was attributed to investors’ belief that the Federal Reserve will refrain from raising short-term interest rates at their policy meeting this week. Fed funds futures indicated only a 34% likelihood of a rate increase this week, according to The Wall Street Journal.

Apple Inc. (AAPL) led the technology sector higher, rising 1.5% on Friday and 4.5% for the week. The technology sector rose 3% for the week.

The health care sector also rallied, led by biotech stocks. The iShares NASDAQ Biotechnology Index (ETF) (IBB) jumped 1.2% and was up 5.2% for the week.

As mentioned, blue chips did well. McDonald’s Corporation (MCD) led, up 2.3%, and Walt Disney Co (DIS) rose 1.8%.

The U.S. dollar continued to lose ground against a basket of currencies, off 0.8% for the week. The euro gained 1.7% for the week, closing at $1.1338. The yield on the benchmark 10-year Treasury note fell to 2.18%, down from 2.22% on Thursday.

At Friday’s close, the Dow Jones Industrial Average rose 103 points to 16,433, the S&P 500 gained 9 points at 1,961, the Nasdaq was up 26 points at 4,822, and the Russell 2000 advanced 5 points to 1,158.

The NYSE Composite’s primary exchange traded 832 million shares with total volume of 3.2 billion shares. The Nasdaq crossed 1.7 billion shares.

For the week, the Dow and S&P 500 gained 2.1%, the Nasdaq rose 3%, and the Russell 2000 was up 1.9%.

QQQ Chart
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Chart Key

This PowerShares QQQ Trust, Series 1 (ETF) (QQQ) reflects the performance of the Nasdaq 100 index, which includes many of the most popular names in the technology sector.

After a week in which the technology sector led an advance, it is helpful to visually review that performance. Following the sell-off on Aug. 24, when QQQ fell as much as 17%, bargain hunters jumped aboard favorites such as Apple, Google Inc (GOOGL) and Facebook Inc (FB).

The index almost rebounded enough to claim a recovery, rising as high as $106.31 on Wednesday. The rally was sharp enough to force a buy signal from MACD, but not enough to overcome the major resistance at the 200-day moving average at $106.92.

IYT Chart
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At the other end of the equity spectrum is iShares Dow Jones Transport. Avg. (ETF) (IYT), which also saw some hefty buying on Aug. 24. However it, too, has failed to penetrate an important line of resistance. Its immediate barrier is at $145.95, the 50-day moving average, followed by the resistance line at about $148. These mark serious obstacles to a further advance.


With a Fed meeting this week and the indices at points of indecision, we would do well to stand aside and not try to outguess the Fed and the stock market’s response to its decision.

Some analysts think that no matter what the decision stocks will fall. Others say even if the Fed were to hike rates stocks are compressed and any decision will result in a relief rally.

There was a popular news-based TV program in the 1960s called, “That Was the Week That Was.” Perhaps we are in such a week and will look back with thoughts of I wish I had bought — or sold. The satirical TV show had the advantage of always looking back with perfect clarity. But for us, it is best to stand aside until we can see the script.

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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