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Traders Firmly in Charge of Stocks

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Stocks broke a five-session losing streak on Thursday after falling sharply following the opening bell.

After the market caught wind that Japan's central bank approved no additional easing, the Dow Jones Industrial Average was hammered with a 169-point sell-off. But by the end of the day, the losses had been erased and the index closed up 0.5%. The other major indices experienced minor reversals up as well. The S&P 500 closed 0.3% higher and the Nasdaq rose 0.2%.

Defensive groups led with telecommunications up 1.2%, utilities adding 0.6%, consumer staples gaining 0.5% and health care up 0.4%. The financials rose 0.3% after heavy selling on Wednesday.

Energy was the only sector to decline (-0.5%) due to the 3.7% drop in oil to $46.21 a barrel.

Gold added 0.8% at $1,296.10 an ounce. And the yield on the 10-year Treasury note fell to 1.57% from 1.60% on Wednesday. The dollar fell against a basket of currencies but rose 0.2% against the euro to $1.1238. Uncertainty regarding the Brexit vote and a lack of direction from the Fed are blamed for the market's recent volatility.

At Thursday's close, the Dow Jones Industrial Average gained 93 points at 17,733, the S&P 500 rose 6 points to 2,078, the Nasdaq added 10 points at 4,845, and the Russell 2000 was down 1 point at 1,148.

The NYSE Composite's primary exchange traded 894 million shares with total volume of 3.6 billion. The Nasdaq crossed 1.8 billion shares. On the Big Board, decliners led slightly, but on the Nasdaq, decliners outpaced advancers by 1.2-to-1. Block trades on the NYSE increased to 5,234, up from 5,016 on Wednesday.

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The S&P 500 reversed a five-day pullback with a low-volume buy signal from my proprietary internal indicator, the Collins-Bollinger Reversal (CBR). The index held the 2,040 line and closed almost exactly on the 50-day moving average at 2,077.44. MACD is still on a sell signal, and volume was below average on Thursday - again.

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The iShares Russell 2000 Index (ETF) (IWM) made an intraday low exactly at its 50-day moving average at $112.59, and closed at $114.55, just below the 20-day moving average at $114.68. Selling volume has been high for most of the week.

Conclusion

When fear is high, investors who base decisions on fundamental analysis take cover. This places technical traders at the market's helm. And when that happens, the highs/lows and closes are often near major technical support/resistance lines and moving averages, the hallmarks of technicians.

The market is trading in a very narrow range, but if institutional investors get into the fray due to a major news event, look for an a violent move up or down. Thursday's late rally was the result of a rumor that a Brexit was off the table and the market temporarily reversed its decline. But when the rumors were denied, the market again became very technical.

The S&P 500 is holding the 2,040 line and flashing a CBR buy signal. While not a game changer, traders should only expect a rally to land at about 2,100, the next technical resistance line.

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 .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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