Last week ended with a slight retrenchment as election week gains rolled into group rotation, accompanied by some profit-taking. On Friday the Dow Jones industrials, the S&P 500 and the Nasdaq fell 0.2%. However, all three ended the week with gains that were not quite so robust as the week before.
Large technology stocks took a beating during election week as money flowed to biotechnology and infrastructure stocks. But the big tech stocks rebounded last week, cutting the prior week’s losses. An example of big techs’ closing of the gap is Amazon.com, Inc. (NASDAQ:AMZN), which fell 8.7% during election week and closed part of that gap last week, gaining back 2.9%. (Statistics: The Wall Street Journal)
Crude oil (December) rose 5.3% to $45.69 per barrel on expectations that the major producing countries would agree to cut output. However no agreement was announced.
At the close on Friday the Dow Jones Industrial Average fell 36 points to 18,868, the S&P 500 closed at 2,182 down 5 points, the Nasdaq lost 12 at 5,322, and the Russell 2000 gained 6 points at 1,316. The NYSE’s primary exchange traded 949 million shares with total volume of 3.5 billion shares. The Nasdaq crossed 1.8 billion shares. On the Big Board, decliners outpaced advancers by 1.1- to-1, and on the Nasdaq, advancers led by 1.2-to-1. Blocks on the NYSE increased to 5,324 from 5,192 on Thursday.
For the week: The DJIA gained 0.1%, the S&P 500 rose 0.8%, the Nasdaq gained 1.6%, and the Russell 2000 added 2.8%.
Despite the election week breakout, the Dow industrials went to a new record high at 18,934, besting the prior twins of 18,595 and 18,366 in July and August. The breakthrough was punctuated by very high volume as the index blasted through the 50-day moving average from a bear-channel consolidation that started in late-July/early August.
Conclusion: Although buyers’ volume was very high and confirmed a breakout, sellers increased to slightly above average on Friday, and MACD is very overbought. Unless buyers emerge early this week, look for profit-taking to take back at least half of the breakout’s gain. I look for a pullback to about 18,600 before bargain-hunting starts again.
But, there is little doubt that as we enter the historically profitable six-month period, the bull is back on the meadow. Buy into declines.
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.
