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The Dow Jones Industrial Average Shows Weakening Resolve for 20,000

The VIX also suggests more sideways movement

On Wednesday, the Dow Jones Industrial Average lost ground for the fifth straight session, erasing all of the gains it made so far in 2017. It was the Dow’s and overall the market’s longest losing streak since October.

The DJIA closed lower by 0.4%. The S&P 500 and the Nasdaq fell 0.5% and 0.3%, respectively, and the Russell 2000 lost 0.9%.

Banks and other financial stocks led the decline and are down 1.1% since Jan. 2. The financial sector dropped 0.6% on Thursday. The Bank of New York Mellon Corp (NYSE:BK) dragged the sector lower, falling 3% after reporting Q4 results that missed expectations.

But railroads traded higher, led by Union Pacific Corporation (NYSE:UNP), which reported better-than-expected earnings, and CSX Corporation (NASDAQ:CSX) jumped 23% after The Wall Street Journal reported that the CEO of Canadian Pacific Railway Limited (USA) (NYSE:CP) departed to join CSX, along with an activist investor, Paul Hilal, in order to “shake up management” at the U.S. rival.

Energy stocks fell 0.7%, ignoring a gain in crude oil (WTI) of 0.5% at $51.27 per barrel.

Finally, the latest weekly initial jobless claims totaled 234,000 whereas the consensus was 254,000.

At the close the Dow Jones Industrial Average fell 72 points, closing at 19,732, the S&P 500 lost 8 to close at 2,264, the Nasdaq fell 16 to 5,540, and the Russell 2000 closed at 1,346 for a loss of 13 points. The NYSE’s primary exchange traded 753 million shares with total volume of 3.2 billion shares. The Nasdaq crossed 1.8 billion shares. On the Big Board, decliners outpaced advancers by 2.9-to-1, and on the Nasdaq, decliners led by 2.5-to-1. Blocks on the NYSE fell to 6,026 from 6,077 on Wednesday.

VIX shows little fear
Click to Enlarge

The Dow Jones Industrial Average Shows Weakening Resolve for 20,000

The CBOE Volatility Index (VIX) shows little fear among options traders. Even the blip in December never reached levels associated with pullbacks of a minor nature. On this chart, the index says “more of the same” sideways movement in stocks.

S&P 30 sec chart block sales
Click to Enlarge

This chart is of yesterday’s last two hours of trading on a 30-second bar chart: It show that a rally was underway for most of the time, but in the final seconds block-sellers dumped stocks, almost breaking the channel recovery.

Conclusion: The sideways consolidation continues. And that’s to be expected following the massive buying following the election. The only “fly-in-the-ointment” is the DJIA, and that could spell more than a sideways consolidation, especially if a violation of its 50-day moving average at 19,466 occurs. The weakness in the Dow is undoubtedly due to the many attempts to break the barrier at 20,000.

Eventually the market runs out of buyers. Next week we’ll examine this more thoroughly.

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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