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Keep Your Eyes on the Nasdaq

The Nasdaq may be the best indicator investors have right now


On Thursday, stocks stumbled, held back by selling in the healthcare and energy sectors. The session began with gains but later, lower crude oil prices had a negative impact and the Dow Jones Industrial Average fell 0.1% and the S&P 500 lost 0.2%. The Nasdaq ended about even.

Healthcare stocks were among the hardest hit due to the uncertainties surrounding the replacement of the Affordable Care Act, or “Obamacare,” advanced in the House Budget Committee on a narrow vote of 19-17.

The iShares Nasdaq Biotechnology Index (ETF) (NASDAQ:IBB) lost 1.3%.

Crude oil (April) fell 0.2% to $48.75 per barrel, reversing Wednesday’s gain. The S&P’s energy sector fell 0.6%.

The technology sector, up 0.2%, gained mostly from Oracle Corporation’s (NYSE:ORCL) better-than-expected earnings, and its decision to raise its dividend. Its management also issued an upbeat view for the year.

At the close, the Dow Jones Industrial Average fell 16 points to close at 20,935, the S&P 500 fell 4 to 2,381, The Nasdaq closed at 5,901 for a slight gain, and the Russell 2000 rose 3, closing at 1,386. The NYSE’s primary exchange traded 804 million shares with total volume of 3.3 billion shares. The Nasdaq crossed a total of 1.7 billion shares. On the Big Board, advancers outpaced decliners by 1.3-to-1, and on the Nasdaq, advancers led by 1.5-to-1. Blocks on the NYSE declined to 6,342 from 7,179 on Wednesday.

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Keep Your Eyes on the Nasdaq

While investors took flight from blue-chip healthcare stocks, the Nasdaq has been leading the markets with a bullish “V” formation and an attack on Wednesday and Thursday on the March intraday high at 5,911. The closing high on March 1 was 5,904.03, and that closing high could turn out to be a benchmark since it is the Nasdaq’s closing all-time high.

Conclusion: The technical test appears to be at the Nasdaq’s closing high. And we should not find that surprising since the Nasdaq has led the second longest bull market in history for much of the advance. The reason for the current advance is the index’s dependence upon technology and financial stocks, both which have led in the past several weeks.

Again, for the most obvious near-term test, observe the close on Nasdaq. A penetration of 5,904.03 would probably drive stocks in all of the indices higher, while a breakdown from the current “V” formation would be viewed negatively.

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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