Major Indices Break Technical Barriers, But…
Sam Collins<p><p>Sam Collins is InvestorPlace.com's Chief Technical Analyst. He has more than four decades of experience in Wall Street firms.</p></p><p><p>In addition to providing fundamental and technical analysis for InvestorPlace.com, he provides FREE daily market commentary each trading day via the <em>Daily Trader's Alert</em>. The <em>Daily Trader's Alert</em> contains his Daily Market Outlook PLUS a Trade of the Day.</p></p><p><p>Sam served as a regular army captain serving in West Germany during the Berlin Wall Crisis before joining Merrill Lynch as a futures broker. Since then, he has been a financial adviser, branch manager, regional manager and certified portfolio manager with national and regional securities firms. While he retired in October 2009, during his career, he received recognition and numerous awards.</p></p><p><p>Sam used technical analysis as a timing and selection technique with portfolios that he managed. He developed a specific technical analysis technique and timing system called the Collins Bollinger Reversal (CBR) that has received national recognition, and he has appeared on local and national TV as a financial commentator.</p></p><p><p>As an equity specialist and technician, he uses technical analysis as a selection technique along with fundamental analysis. As a value buyer, his goal is to find companies with outstanding management, unique products and strong financials that have not yet been driven to unreasonable prices. His CBR system helps him to screen vast amounts of data for stocks that meet those standards.</p></p>Sam is also a member of the NASD Board of Arbitrators.Stock Market Today
The major indices roared past several technical barriers on Thursday. They were pushed higher by a rally in crude oil prices and buyers chasing several beaten-down sectors.
WTI crude rose 2.9% to $33.07 a barrel for the day after Venezuela’s oil minister said he would meet with other major oil-producing nations in hopes of finding a way to stabilize prices. However, no response has yet been received from the other OPEC members.
Hard-hit financial stocks led the day’s advance, up 1.4%. But the sector is still down more than 11% for this year.
Salesforce.com, inc. (CRM) was the best-performing stock in the S&P 500. Shares jumped 11% after the company reported better-than-expected quarterly sales and issued positive guidance for the full year.
Orders for durable goods rose 4.9% in January, the biggest monthly gain since spring. Jobless claims increased by 10,000 to 272,000.
The yield on the benchmark 10-year Treasury note fell to 1.71% from 1.75% on Wednesday despite an increase in bond prices, which is odd.
The euro rose slightly against the U.S. dollar to $1.1019. Gold was down slightly at $1,238.20 an ounce.
At Thursday’s close, the Dow Jones Industrial Average gained 212 points at 16,697, the S&P 500 rose 22 points to 1,952, the Nasdaq advanced 40 points to 4,582 and the Russell 2000 was up 10 points at 1,032.
The NYSE Composite’s primary exchange traded 952 million shares with total volume of 4 billion. The Nasdaq crossed 1.6 billion shares. On the Big Board, advancers outpaced decliners by 2.9-to-1, and on the Nasdaq, advancers led by 1.5-to-1. Block trades on the NYSE fell to 5,673 from 6,147 on Wednesday.
The Dow Jones Industrial Average broke through two major barriers on Thursday:
- The 50-day moving average at 16,600; and
- The resistance line at 16,680 that connects the tops in August and September.
However, volume was light and the MACD indicator is overbought.
Since its mid-December low, the Dow Jones Utility Average has had a 16%-plus run and paid some hefty dividends on top of that. It broke to a new high Thursday, acting more like a hot tech stock than a stodgy utility index.
Conclusion
As I mentioned, the major indices broke some technical barriers, but it’s not always what a stock or index does, but how it does it.
For example, if the stock market and the economy have such a great outlook, why are three defensive groups — utility stocks, gold and U.S. Treasury bonds — rallying?
Yes, these groups are now overpriced and should be the subject of profit-taking, but that doesn’t answer the basic question as to “the why” of the move higher.
I’ve got some thoughts of my own on the continuing move higher by defensive investments, but I’d like to hear what our readers have to say about this conundrum. I’ll pick up the discussion on Monday.
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.