Stocks opened slightly higher Thursday following Wednesday’s triple-digit decline, but despite a strong rally in health care stocks, the major indices closed lower for the second consecutive day.
The reason for the decline was again a lack of concrete results from meetings between Greece’s financial representatives and eurozone finance ministers. Negotiations are expected to extend into the weekend, but it was reported that there are significant differences over some basic issues that could result in another extension.
Health care stocks jumped as a result of a ruling from the U.S. Supreme Court upholding a key part of the Affordable Care Act. HCA Holdings Inc (HCA) rallied 8.9%, Tenet Healthcare Corp (THC) gained 12.2%, Universal Health Services, Inc. (UHS) rose 7.8% and Community Health Systems (CYH) spiked 13%.
The financial sector fell 0.6%, and industrials also lagged, off 0.8%. The energy sector was down 1% as oil extended its losses from Wednesday on higher inventory levels and lower-than-expected consumption. Crude prices declined 0.9% to $59.73 a barrel.
The U.S. dollar fell 0.2% versus a basket of currencies. The euro closed flat at $1.12. Gold was off 0.04% at $1,172.40 an ounce.
At Wednesday’s close, the Dow Jones Industrial Average fell 76 points to 17,890, the S&P 500 dropped 6 points to 2,102, the Nasdaq lost 10 points at 5,112, and the Russell 2000 was down 1 point at 1,283.
The NYSE’s primary market traded 773 million shares with total volume of 3.2 billion. The Nasdaq crossed 1.6 billion shares. On the Big Board, decliners outpaced advancers by 1.8-to-1, and on the Nasdaq, decliners led by 1.2-to-1.
This close-up chart of the Dow Jones Industrial Average clearly shows a short-term trendline with support at 17,800, which is 130 points above the Dow’s 200-day moving average at 17,670. Under “normal” circumstances, this should be enough to stabilize the market above a breakdown through the crucial 200-day moving average.
However, the Dow Jones Transportation Average is on the verge of an important sell signal. Support is at the May low at 8,224.37, just 15 points below Thursday’s close. And MACD is very close to a new sell signal.
Conclusion
CNBC’s anchors mentioned the possible breakdown and a Dow Theory non-confirmation almost hourly on Thursday. As our readers know, I’ve been emphasizing its negative implication since at least April.
However, now that there is so much widespread coverage of the issue, it is possible that a false break on low volume could occur. And even if high volume accompanies a break today, that volume could be the result of quarterly rebalancing of the Russell 2000.
My message is this: Two unusual items could have an impact on trading today — rebalancing and Greece’s credit woes. Neither should have a long-term impact on the stock market. Be careful and don’t chase the TV hype. In the long run, a measured, thoughtful approach is better than one triggered by emotion.
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.
