The market rose Thursday, pulled along by energy stocks, which jumped despite a continuation of oil’s decline.
The rally ended a three-day sell-off as the S&P 500 rose 0.2% and the Dow Jones Industrial Average gained 0.5%. Profit-taking in the final hour of trading took back a significant portion of the day’s gain and deprived the S&P 500 of a close above its 50-day moving average.
Crude oil fell 1.1% to the lowest level since 2009 at $36.76 a barrel. This followed a report from OPEC saying it pumped oil at the fastest pace in November since 2012, and that output exceeded projected 2016 demand by nearly 900,000 barrels a day.
Chevron Corporation (CVX) and ConocoPhillips (COP) cut their capital expenditure budgets for 2016 by about 25%, but both stocks rallied more than 1.5%. (See the Trade of the Day.)
Next week’s FOMC meeting is still expected to result in a small increase in short-term interest rates. But there continues to be a difference of opinion as to whether stocks will rally or fall on the news. Some say a rate hike is confirmation the Federal Reserve sees a strong economy, while others think the Fed should follow the ECB with a similar easy money policy.
The euro fell 0.6% against the U.S. dollar at $1.0954 but is still up 3.5% against the greenback in December. Gold fell 0.4% to $1,073.10 an ounce.
At Thursday’s close, the Dow Jones Industrial Average gained 82 points at 17,575, the S&P 500 added 5 points at 2,052, the Nasdaq rose 22 points to 5,045, and the Russell 2000 was up 3 points at 1,149.
The NYSE Composite’s primary exchange traded about 850 million shares with total volume of 3.7 billion. The Nasdaq crossed 1.7 billion shares. On the Big Board, there were slightly more decliners than advancers. On the Nasdaq, advancers led by 1.2-to-1.
Even though the major indices closed higher, the Volatility S&P 500 (VIX), i.e., the “fear index,” is showing signs of worry. It closed more than 11% higher on both Tuesday and Wednesday, but retreated by just 1.4% on Thursday.
The NYSE Composite represents all stocks traded on the NYSE and, thus, provides a unique slice of what the market’s true trend is.
There are three points of resistance: 10,630 (drawn from the midyear triple-bottom), 10,640 (the closing high, which touches the bearish resistance line), and 10,523 (the December high that also meets the bearish resistance line).
Also of concern is the fragile triple-bottom at 10,156, which Thursday’s low penetrated by a fraction.
Conclusion
The market seldom does what the majority of investors thinks it will do. Thursday was an example of that as crude oil fell and energy stocks rose, which seems contradictory. My theory is that tax-loss selling (who could have any profits in energy stocks except short sellers) abated enough for bargain hunters to ply their trade.
Volatility is very high as traders swing trade the market. If you are good at that, stocks offer a great opportunity to rack up some gains before Christmas. But, with some exceptions, longer-term investors should boost the economy by plopping down some cash at your local mall instead.
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.
