By John Nyaradi
The Dow Jones Industrial Average continued making history on Thursday as it logged a tenth straight positive close on lower than average volume. The S&P 500 also rose to close just below its all time closing high last seen in October, 2007.
For the day, the Dow Jones Industrial Average added 83 points, the S&P 500 climbed 0.56% and the Nasdaq 100 rose 0.31%. The Russell 2000 powered higher with a gain of 0.91%. Oil gained 0.66% to finish the day at $93.13/bbl. while gold closed up 0.15% at $1588.90/oz.
Unemployment reports were generally positive yesterday as weekly jobless claims fell to 332,000 and helped power the Dow Jones Industrial average to its longest win streak since 1996. VIX, the CBOE S&P 500 Volatility Index, also known as the “fear index,” fell to 11.30, a multi-year low not seen since 2007.
However, with trading volumes down some 10% year over year in major stock indexes like the Dow Jones Industrial Average and Nasdaq Composite it’s clear that the rally is not being supported by retail investors, contrary to other record breaking rallies which saw more volume as the rallies continued and so fed on themselves in a positive feedback loop of more volume and higher prices.
Also, leading sectors recently have been defensive areas like healthcare, while typical market leaders like materials and technology have been lagging major index gains. Additionally, mutual fund and equity inflows have not been overwhelmingly strong, all signs that the rally is not being wholly endorsed or fully embraced by market participants.
On a technical basis, major U.S. stock indexes like the Dow Jones Industrial Average and S&P 500 remain wildly overbought.
In political news, President Obama and leaders of Congress continued meeting today with apparently no progress towards a compromise on budget cutting or tax increases as the sequestration cuts continue to take hold. However, major U.S. stock indexes like the Dow Jones Industrial Average apparently remain unconcerned about the potential negative effects of reductions in government spending on economic growth and stock market activity.
Today brings reports on consumer sentiment, industrial production and the Empire State Index to finish out the week.
Bottom line: The Dow Jones Industrial Average continues to defy gravity on a low volume rally that leaves the S&P 500 close to all time highs last seen in October, 2007.
Disclosure: Wall Street Sector Selector actively trades a wide range of exchange traded funds and positions can change at any time.