Most U.S. stocks moved cautiously higher on Wednesday, but energy stocks outperformed as crude prices rallied.
WTI oil rose 4.9% to $38.29 a barrel even after the Energy Information Administration said oil inventories were higher than anticipated. However, gasoline and diesel stockpiles fell much more than expected.
Leading energy stocks included Marathon Petroleum Corp (MPC), up 5.4%, and Chevron Corporation (CVX), up 4.6%.
Biotech was again one of the weakest sectors with the iShares NASDAQ Biotechnology Index (ETF) (IBB) tumbling 1.2%.
Today’s ECB monetary policy meeting will be the focus of many investors. The central bank is expected to embark on more easing measures. Specifically, The Wall Street Journal reports economists are looking for the deposit rate to drop further into negative territory and for an increase in the bond-buying program. Anything less than an aggressive plan could lead to a drop in stock prices.
The euro has advanced against the U.S. dollar for five straight sessions leading into this meeting.
The yield on the 10-year Treasury note rose to 1.90% from 1.83% on Tuesday. Gold lost 0.4% at $1,256.60 an ounce.
At Wednesday’s close, the Dow Jones Industrial Average rose 36 points to 17,000, the S&P 500 gained 10 points at 1,989, the Nasdaq jumped 26 points to 4,674, and the Russell 2000 was up 5 points at 1,073.
The NYSE Composite’s primary exchange traded 958 million shares with total volume of 4 billion. The Nasdaq crossed 1.8 billion shares. On the Big Board, advancers outpaced decliners by 2.3-to-1, and on the Nasdaq, advancers led by 1.5-to-1. Block trades on the NYSE fell to 5,576 versus 6,514 on Tuesday and 7,215 one week ago.
The Dow Jones Industrial Average has reached a significant technical resistance area — the confluence of the resistance line at 17,175 and its descending 200-day moving average at 17,163.
Volume is less than normal and the MACD indicator is curling down. After an impressive run on higher-than-average volume, which easily sliced through the 50-day moving average, momentum is declining.
The industrials’ companion, the Dow Jones Transportation Average, appears to have stalled. But Wednesday’s low of 7,479 was above the support line at 7,455.
Like the Dow Jones Industrial Average, the transports are also suffering from low volume, and the MACD indicator is arching down.
The Dow Jones Transportation Average is recognized by many economists as one of the few predictive stock indices. The index now faces a resistance band that has taken months to develop. Now we must wait and see if it can penetrate such overwhelming resistance.
Conclusion
Today’s charts are daunting reminders of how difficult it is to predict short-term stock movements. I admit to being surprised by the straight-line advance of the past month.
But keep in mind that these indices were moving against light technical resistance. They are now faced with serious overhead, which will more than likely take some time to overcome.
I have stated before that the target for this year is no progress. The resistance bands that are so visible now are likely to hold all advances for the next nine months.
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.
