A gradual afternoon advance managed to offset early losses that resulted from a decline in European bourses due to an excessive need for capital. But the afternoon advance was held in check by weakness in the technology sector, which was down 2%.
However, even a mixed close was greeted with optimism by traders who pointed out that the slight gain in the Dow industrials, following a huge advance on Monday, puts the blue-chip index in positive territory for the week, month and year.
The technology sector dragged down the Nasdaq, but it was the only sector in the S&P 500 to close at a loss. The Dow Jones Industrial Average rose 4 points to 12,108, up 0.03%, the S&P 500 gained 2 points to close at 1,244, up 0.19%, and the Nasdaq fell 26 points to 2,578, off 0.99%. The NYSE traded 823 million shares and the Nasdaq crossed 500 million. Advancers were ahead of decliners on the Big Board by 1.6-to-1, and even on the Nasdaq.
With this week’s reversals, the worst-case scenario, i.e., a complete collapse of the S&P 500, has been averted. Now with the index having run up and above its 50-day moving average (blue line), the immediate direction has again turned in its favor. But with lower highs and higher lows, the intermediate trend is no better than neutral. The 200-day moving average at 1,260, along with the bearish resistance line (red dash), are clearly the near-term goals and initial steps that the bulls must surmount in order to enter 2012 with a more positive outlook.
Because of the thousands of stocks listed on the combined S&P 500 and NYSE Composite indices, these charts represent the broadest visual display of what is occurring in the U.S.stock market.
Like the S&P 500, the NYSE is trading within a triangle and in an intermediate-term sideways trend. But unlike the S&P 500, it is much farther from the important 200-day moving average and is just slightly above its 50-day moving average (blue line).
But the similarity worth noting is the momentum histogram (red at bottom of chart). In both charts, we see that momentum declines on rallies and is currently negative. The normal interpretation of this is that there have been few heavy-duty, institutional investors willing to invest for long-term gains.
Despite fits and starts that aid the traders, until the big money is willing to step up to the plate, stocks will more than likely continue to trade sideways. When they do decide to enter the market and break through the barriers that we’ve discussed, the momentum indicator should turn positive, and at that time so should we. For help making fast profits regardless of the market’s direction, check out my colleague John Jagerson.)
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.
