On Thursday, stocks started higher as a result of better-than-expected employment data and the lowering of rates by China and the European Central Bank. The Bank of England decided not to lower rates, but to increase the size of its bond-buying program. But the ISM services index came in lower than expected, and the gains disappeared.
At the close, the Dow Jones Industrial Average was off 47 points at 12,897, the S&P 500 fell l6 points to 1,368, and the Nasdaq was unchanged at 2,976. The NYSE traded 683 million shares and the Nasdaq crossed 380 million. Decliners led advancers by about 1.2-to-1 on both exchanges.
With the S&P 500 clearing important resistance at 1,357 to 1,364, you would think that the bulls would be rushing to attack the old highs. Instead, Thursday was a down day with mediocre volume and breadth. Now those numbers become a support zone, and a break of the zone would set up the index for a test of the 20-day and 50-day moving averages at about 1,340.
Like the S&P 500, the Nasdaq has broken above some key resistance lines: the downtrend line at about 2,940 and the 50-day moving average around 2,895. Its next target is 3,085.
Conclusion: The general rule is to follow the price action, which now appears to be up. But considering the overhead resistance and a pronounced weakening of momentum, the “breakout” may not take the indices very far.
Today’s unemployment numbers are an important gauge. Before we jump in with both feet, we must consider the impact of the report. If it’s too high, the Fed is likely to provide more stimulus. But if they are relatively “as expected,” look for a pullback to the major support zones.
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.
