Tired Market Needs to be Shaken Up

There are few signs of strength from a technical viewpoint

Stocks closed marginally higher Wednesday, breaking a seven-session losing streak in the Dow Jones Industrial Average. The advance was helped by energy and financial stocks.

A surprising drop in gasoline inventories resulted in oil jumping 3.3% to $40.83 a barrel. This was its best day in more than three weeks and almost brought the commodity out of bear market territory. Notable gainers included Chesapeake Energy Corporation (NYSE:CHK), up 8%, and Valero Energy Corporation (NYSE:VLO), up 4.5%.

In the financial sector, American International Group Inc (NYSE:AIG) rose 7.3% after announcing a 6.3% increase in net income in Q2. Citigroup Inc (NYSE:C) gained 2.1% and Bank of America Corp (NYSE:BAC) advanced 2.5%.

The Dow Jones Transportation Average was one of the day’s best-performing indices, gaining 0.8%. Avis Budget Group Inc. (NASDAQ:CAR) was in the lead, up 6.1% after delivering better-than-expected guidance. Several rail stocks gained including Union Pacific Corporation (NYSE:UNP), up 1.7%, and CSX Corporation (NASDAQ:CSX), up 2%.

At Wednesday’s close, the Dow Jones Industrial Average gained 41 points at 18,355, the S&P 500 rose 7 points to 2,164, the Nasdaq added 22 points at 5,160, and the Russell 2000 jumped 10 points to 1,213.

The NYSE Composite’s primary exchange traded 898 million shares with total volume of 3.7 billion. The Nasdaq crossed 1.9 billion shares. On the Big Board, advancers outpaced decliners by 2.1-to-1, and on the Nasdaq, advancers led by 1.9-to-1. Block trades on the NYSE declined to 5,070 from Tuesday’s 5,384.

Dow Jones Industrial Average Chart
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chart-key-NEW

There are several troubling technical items on the chart on the Dow Jones Industrial Average. The “tight flag” has failed and developed into a “channel down,” supportive volume is seriously lacking, and MACD is on a sell signal. The next support is at the April high at 18,168, then the 50-day moving average at 18,031, and finally, the support line at 17,950.

Dow Jones Transportation Average Chart
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Turning to the chart of the Dow Jones Transportation Average, Wednesday’s 63-point advance was not supported by high volume — a minus. And the index failed to close above its 50-day moving average at 7,716, missing it by 5 points. MACD is on a sell signal, and the transports are trading in a narrow range with support at 7,465 and resistance at 8,100.

Conclusion

This is a tired market, marked by very low volume on the two major Dow indices. Perhaps it’s just another day at the beach for many traders, but from a technical viewpoint, there are few signs of strength.

Even Wednesday’s recovery by the S&P 500 lacked the momentum to carry it any farther than the bottom of its current range at about 2,160. Perhaps something will shake the indices out of this tight trading range, but it will have to come from earnings or news since there is little technically to indicate that a solid rally is forthcoming.

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.


Article printed from InvestorPlace Media, https://investorplace.com/2016/08/daily-market-outlook-tired-market-needs-shaken/.

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