How Should You Play the S&P 500? Grab Your Crystal Ball

On Thursday, stocks rose in concert with the energy sector and advancing oil prices.

All of the major indices closed above their respective 50-day moving averages except the small-cap Russell 2000. The Russell closed below the line by about 12.5 points, but still rose 0.9%. The Dow Jones Industrial Average gained 0.1%, the S&P 500 rose 0.2% and the Nasdaq gained 0.3%.

The broad market was strong until afternoon profit-taking took some points away. However, energy was in demand, and that boosted prices until the final bell. Crude oil (May) WTI gained 1.1% jumping to $51.70 per barrel for its third consecutive gain. And energy stocks followed with Devon Energy Corp (NYSE:DVN) up 3.3%, Chesapeake Energy Corporation (NYSE:CHK) rising 2.8% and Chevron Corporation (NYSE:CVX) gaining 0.6%.

At the close, the Dow Jones Industrial Average gained 15 points to close at 20,663, the S&P 500 rose 5 to 2,357, the Nasdaq gained 14 points at 5,879, and the Russell 2000 gained 12 points at 1,364. The NYSE primary exchange traded 808 million shares with total volume of 3.2 billion shares, and Nasdaq crossed 1.8 billion shares. On the Big Board, advancers outpaced decliners by 3.1-to-1 and on the Nasdaq, advancers led by 2.2-to-1. Blocks on the NYSE fell to 6,558 from 7,196 on Wednesday.

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How Should You Play the S&P 500? Grab Your Crystal Ball

The reversal (down) on Wednesday was accompanied by high volume. But yesterday’s turn back up also had volume pushing it along. Overall two CBR buy signals on the iShares Russell 2000 Index (ETF) (NYSEARCA:IWM), the last at $132.40, sit astride the support line at $134.08. The move higher must pick up more volume in order to penetrate the overhanging 50-day moving average at $136.88. If, on the other hand, sellers turn from the blue line and penetrate the reversal at $132.40, this would be considered an unfavorable occurrence.

Conclusion: As one sage said, “The stock market will do whatever is necessary to confound the greatest number of investors.” Wednesday and Thursday of this week are perfect examples of that. Wednesday’s action was especially perplexing. However, it was so bizarre that I warned readers to raise some cash, “Since reversals occurred in many stocks following higher prices in the morning, the near-term trend is down, but stocks are still in a secular bull market, and that means that prices should eventually break to new highs.” And they may be on course to do that. However, technically we have a “no go,” and that is what I’m doing, as well as taking some cash from profits made this year.

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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