Stock Picking is Paramount in This Risky Market

A volatile first quarter ended with the Dow Jones Industrial Average up 1.5% and the S&P 500 up 0.8%.

Biotech stocks outperformed on Thursday with the iShares NASDAQ Biotechnology Index (ETF) (IBB) up 2.3%.

The PHLX Semiconductor (SOX) fell 0.6%. Component Micron Technology, Inc. (MU) lost as much as 4.5% after reporting disappointing quarterly results and guidance. But the stock recovered to finish down just 0.1%.

Commodity-sensitive materials stocks were some of the worst performers, with the group falling 0.8%. This was due in part to a USDA report that showed farmers would plant more crops this year despite record high stockpiles. Big caps Monsanto Company (MON) and Mosaic Co (MOS) both lost nearly 4%.

Initial jobless claims increased 11,000 to a seasonally adjusted 276,000 last week. And investors will be watching today’s jobs report closely.

Oil was up slightly at $38.34 a barrel and is now more than 40% above the lows made in February.

The yield on the 10-year Treasury note fell to 1.78% from 1.83% on Wednesday as bond prices rose. Gold advanced 0.6% to $1,234.20 an ounce and was up more than 15% for the quarter.

At Thursday’s close, the Dow Jones Industrial Average fell 32 points to 17,685, the S&P 500 lost 4 points at 2,060, the Nasdaq rose less than a point to 4,870 and the Russell 2000 gained 4 points at 1,114.

The NYSE Composite’s primary exchange traded 998 million shares with total volume of 3.6 billion. The Nasdaq crossed 1.7 billion shares. On the Big Board, advancers outpaced decliners by 1.3-to-1, and on the Nasdaq, decliners led by a fraction. Block trades on the NYSE rose to 5,528 from 5,435 on Wednesday,

S&P 500 Chart
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Our 17-month moving average chart for the S&P 500 reversed for the fourth consecutive month — this time back to a buy signal. However, note that it has not registered a new high since last year. And the flattening of the moving average looks suspiciously like previous tops.

MDY Chart
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Chart Key

The SPDR S&P MidCap 400 ETF (MDY) broke through its 200-day moving average at $257.59 and its bearish resistance line (red-dotted line), both bullish developments. However, my proprietary internal indicator, the Collins-Bollinger Reversal (CBR), flashed a sell signal on Wednesday.


There are always crosscurrents that tend to confuse analysts. However, the high volatility brought on, in my opinion, by the Federal Reserve’s lack of effective communication skills, has created some very odd market trends.

Additionally, a strengthening U.S. dollar, falling oil prices and weak consumer spending remain fundamental risks.

Our 17-month moving average for the S&P 500 aptly demonstrates the high degree of volatility that stock buyers have endured. I believe that it is telling us to accept this situation as the “new normal.”

In order to counter the high risk of purchasing stocks at a market high, we must stick with fundamentally sound stocks with a track record of consistent earnings increases and dividends. Then, even if a correction occurs, and it will, we will own those that institutions buy back first.

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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