Courtesy of Doug Short.
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The Dow Jones Industrial Average and other major U.S. stock indexes stage another rally.
The Dow Jones Industrial Average (NYSEARCA:DIA) dipped slightly going into the Easter Holiday weekend but gained 2.4% for the week as the sideways trading range continues.
The S&P 500 (NYSEARCA:SPY) added 2.7% for the week while the Nasdaq Composite (NYSEARCA:QQQ) climbed 2.4% on the week.
The Russell 2000 (NYSEARCA:IWM) also gained, adding more than 2% for the week.
Major U.S. stock indexes have been rallying back from the previous weeks’ declines but remain in a trading range that began in mid-February.
Most of the recent damage was done in the Nasdaq (NYSEARCA:QQQ) and Russell 2000 (NYSEARCA:IWM) but these two have reclaimed their respective 200 day moving averages and the four major U.S. stock indexes have been in rally mode and apparently are ready to mount yet another challenge to breakout above their recent highs.
While all of the indexes remain on various technical “sell” signals, the tide is clearly changing and now we’ll have to wait and see whether or not this latest challenge will be successful.
A breakout higher would be positive for U.S. markets while another failure could open the door to lower prices. Trading ranges and false breakouts, both up and down, like we’ve seen in the last couple of months are frustrating. However, they always end in one direction or other, and the longer they go on, the more powerful the subsequent breakout usually is.
On My Stock Market Radar
The point and figure chart of the Dow Jones Industrial Average (NYSEARCA:DIA) paints a clear picture of the current situation.
The index has reversed course into a column of Xs which indicates that demand is now again in control of the markets, but the rally hasn’t been strong enough to generate a new “buy” signal and so the index remains with a bearish price objective of 15,600. A break above 16,450 would generate a new “buy” signal and open the door to a new challenge of the 16,600 level and new highs.
As usual, major factors are the Federal Reserve and the current earnings season that is now entering full swing.
So far earnings have been mixed, however, the indexes have shaken off the negative reports and focused on mostly positive recent economic news. Janet Yellen once again soothed markets in a speech last week and European and Asian markets showed gains on Friday while U.S. markets were closed for the Good Friday holiday.
In earnings news, banks were relatively strong with Morgan Stanley, Goldman Sachs and Wells Fargo cheering investors while tech continued showing weakness with disappointing results from IBM (NYSE:IBM) and Google. (Nasdaq:GOOGL)
- Next week brings a flood of earnings reports and some of the more closely watched companies include:
- Tuesday: McDonalds (MCD), ATT,(T) YUM Brands! (YUM)
- Wednesday: Boeing (BA), Apple (AAPL), Facebook (FB)
- Thursday: Caterpillar (CAT), General Motors (GM), Verizon (VZ)
- Friday: Ford (F)
Last week’s economic reports brought positive news in March retail sales which climbed 1.1% and beat expectations, along with a positive month over month gain in the April home builder’s index. Weekly jobless claims came in lower than expected while the April Philadelphia Fed report crushed expectations with a print of 16.6 versus the expected 10.0
On the minus side of the ledger, the April Empire State Index posted a sharp decline to 1.3 from last month’s 5.6 and March Industrial Production fell to 0.7% from the previous month’s 1.2%.
Next week’s economic reports include:
- Monday: March leading indicators
- Tuesday: March existing home sales
- Wednesday: April Markit PMI, March new home sales
- Thursday: March durable goods orders, weekly unemployment
- Friday: University of Michigan consumer sentiment
The big market drivers are likely to be Wednesday’s PMI report, consumer sentiment and the onslaught of earnings reports.
Bottom line: The Dow Jones Industrial Average and other major U.S. indexes show continued resilience with the help of the Federal Reserve but remain locked in a sideways trading range. More volatility and choppy conditions can be expected.
Originally posted at Wall Street Sector Selector
