U.S. Stock Market Breadth Keeps Improving But Trading Volume Falls

Stocks keep rising as traders remain confident about the U.S. economic recovery. Federal Reserve Chairman Jerome Powell also confirmed yesterday that he won’t make a hasty decision about loose monetary policy.

However, speculators have their doubts, and they’re aching to short the stock market for two reasons. Firstly, they do not see any evidence of strong volume while the Dow Jones Industrial and the S&P 500 post record highs. Secondly, they firmly believe that rising bond yields are likely to end up in some sort of disaster.

Only time will tell who is right, but fund flow does indicate that this week we have seen money coming out of the most liquid ETF, the SPY, which represents the S&P 500. But we have seen tremendous inflow in QQQ ETF, which mirrors Nasdaq NDAQ .  

Asian Markets 

The Asian stock market mainly traded higher today. The Shanghai index advanced 0.08%. The HSI index increased by 1.16%, while the ASX index gained 1.02%. The Nikkei index dropped by 0.07%.

Dow Jones and S&P 500: Market Breadth

The Dow Jones’ market breadth gained further momentum yesterday. 93% of the Dow Jones stocks traded above their 200-day moving average. 

The S&P 500 stock breadth also displayed strength yesterday. 94% of the shares traded above their 200-day moving average. 

Dow Jones Futures Today

The Dow Jones futures are trading higher today. In terms of economic data, it was all about the U.S. Initial Jobless Claims numbers which came out much weaker than the forecast. The actual number came in at 744K while the forecast was for 682K. This number is known for being volatile as last week we experienced a dramatic increase in this number. 

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The Dow Jones Industrial Average has seen a tremendous rally in recent weeks. There is no doubt that the price has gone too far and too fast, and this could be the reason that we have started to see the Dow consolidating now.

It is likely that we may see some healthy correction as the Relative Strength Index has reached 70, a level which indicates that prices are too rich and prone to some sell-off. Having said that, the bull trend is firmly intact as Dow Jones’s price is trading above the 50, 100, and 200-day SMA on the daily time frame. As long as the price continues to trade above these averages, we have nothing to worry about. 

The near-term support is at 32,864, while the resistance is at 33,670.  

Stock Market Rally

 The S&P 500 stock index closed higher yesterday; the index advanced by 0.15%. The communication sector led the index higher, and 5 out of 11 sectors closed lower. 

 The Dow index soared yesterday; the Dow stocks moved the index higher by 0.05%. 16 shares advanced, while 14 shares closed lower. 

 The NASDAQ composite, a tech-savvy index, closed slightly lower by 0.07% yesterday.

S&P 500 Leaders and Laggards: L Brands LB and Albemarle Corp 

L Brands stock contributed the biggest gain, soaring 3.62%. Albemarle Corp stock was the largest drag; it fell by 6.01%. The S&P 500 stock index is up 1.74% so far this year.

Dow Jones Leaders and Laggards: JP Morgan and Walt Disney DIS  

JP Morgan provided the biggest help for the Dow Jones yesterday; it advanced by 1.57%, while Walt Disney was the largest decliner, it fell by 1.14%.