Stocks showed little oomph on Tuesday after Monday’s technology sell-off, but small caps and transportation-related issues continued to gain more traction.
XAutoplay: On | OffMeanwhile, Apple (AAPL) defied the listless action of the Nasdaq composite, which nevertheless rebounded 0.4% is still holding fort in its defense of the 50-day moving average. The former gained 1.5% to 152.47 in heavy trading and is trying to snap a sharp four-day sell-off. The Nasdaq composite is up barely, the Nasdaq 100 up less than 0.2%.
The Dow Jones industrial average and the S&P 500 were up no more than 0.1% to 0.2%. Dairy, medical services, and select retail stocks rebounded. Truck, airline and other stocks helped push the Dow Jones transportation average up 0.5%,nearly matching the S&P SmallCap 600’s 0.6% gain. Volume was running lower on both main exchanges vs. the same time on Monday.
Since its Aug. 24 recent low, the Dow transports have rallied 8.3%, broadly outperforming the S&P 500’s 2.4% rise over the same time frame.
Despite growing fears as seen in news headlines that the market is getting frighteningly close to a major peak, the market’s technicals continue to refute such thinking. On the NYSE, winning stocks were beating losers by a more than 4-to-3 margin.
As seen in the “What’s The Market Trend?” page, a daily PDF link at the bottom of IBD’s Big Picture column, the NYSE advance-decline line continues to mark new highs. A rising NYSE A-D line is one sign of a healthy uptrend.
No doubt, the huge advance since the March 2009 bottom certainly makes the market vulnerable to a correction, especially if a geopolitical event such as military conflict in North Korea takes hold, or the Federal Reserve suddenly accelerates its intention to raise the cost of money. However, for now, an improving U.S. economy, prospects for economic recovery in Europe, increasing global trade and low interest rates around the world could set the stage for further gains in global equity markets.
Going back to Apple, even though the stock has recently pierced its 50-day moving average (as seen in red on a daily chart at Investors.com) and dipped below the 156.75 proper entry in a flat base, the recent action is not unusual. Many great stocks, both big cap and small cap, will test a breakout level and shake out uncommitted holders before resuming their runs.
Consider that in the end of 2016, Apple spent nearly seven weeks trading below its 50-day line, then hopped back above it in December. That action ultimately produced an excellent cup-with-handle base that yielded a breakout on Jan. 6-9 this year at 118.12.
In the most recent correction, the iPhone giant spent no more than five weeks below its 50-day line. Again, normal action.
At this point, watch to see if Apple can rebound in decent volume and return back above the 156.75 entry (10 cents above the flat base’s left-side high). If it does not immediately do so, then you can expect the stock to potentially form a new base.
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