The market's cracks are starting to show
The charts are signaling vulnerability and the economy contracted in Q4.
Stocks started off Wednesday on a down note following the Commerce Department's report that fourth-quarter GDP contracted by 0.1%. Analysts had expected 1% growth.
The decline was mostly attributable to a 22.2% cut in defense spending, but resulted in the first contraction since the beginning of the recovery in 2009. But there was some positive news in the study: Personal consumption expenditures rose 2.2% -- and that category accounts for 70% of GDP.
Amazon (AMZN) rose 4.8% after reporting better-than-expected operating income, and Boeing (BA) gained 1.3% following better earnings despite management’s guidance of lower earnings for 2013 than previously anticipated.
At Wednesday's close, the Dow Jones Industrial Average was off 44 points at 13,910, the S&P 500 fell 6 points to 1,502, and the Nasdaq was off 11 points at 3,142. The NYSE traded 704 million shares and the Nasdaq crossed 452 million shares. Decliners outpaced advancers on the Big Board by 1.8-to-1, and by 2.3-to-1 on the Nasdaq.
A sharp advance like that on the Dow Jones Industrial Average chart usually can't be maintained for much longer than two months. The industrials have held onto it for almost three months, but that streak may be coming to an end.
Wednesday's lower close was very near a key reversal day. Also note the slightly curving moving average convergence/divergence (MACD) red line, the first hint of a loss of momentum.
The Dow Jones Transportation Average accomplished a steep angle of advance that must be close to a record for duration, degree, and total advancing days. But like the industrials' chart, the angle is close to breaking. The MACD fast line (red) shows a clear hook down, and its blue histogram is close to entering bearish territory.
Conclusion: There may be more new highs in the next several days; however, prudence dictates that new positions be entered with a high degree of caution. All internal indicators are overbought, and less optimistic economic indicators could follow the negative GDP numbers. It is clearly time to consider taking profits on trading positions.
All investors should become aware of important support zones for both the major indices and stocks they wish to own since a buying opportunity may shortly occur.
For the S&P 500, the first line of support is at 1,480 (20-day moving average), then the support line at 1,474, and finally, at 1,440 (50-day moving average). For the Dow, the first support is at 13,605 (20-day moving average), then the support line at 13,653, and finally, 13,277 (50-day moving average). The Nasdaq's support zones will be covered on Friday.
More from InvestorPlace
Personal consumption expenditures rose 2.2%, 4th quarter includes December which includes the Christmas holidays people buy more during the holidays. For the GDP to contact during the 4th quarter is a very serious and troubling sign.
Also MSN talks about the large jump in personal incomes in December like is was a good thing, it was people cashing out investments, moving money, and getting their finances out of areas that were taxable out of fear over how high taxes were going to increase Jan 1st. Not a good thing.
Both parties are still focused on their personal agendas passing out kool-aid to everyone, but not focusing on Americas needs. Both sides are throwing up large smoke screens to keep people distracted from the upcoming financial collapse. IE. gun control, the deficit, immigration, Obama Care, tax the rich, entitlements, Gay rights, abortion, on and on. These are all important issues, but Americas house is on fire and both parties are arguing over the type of carpet we need. We have to put the fire out first, Jobs, Jobs Jobs but know one is focusing on most important issue. At this rate Americas house will be burnt down but we will have a real nice roll of carpeting sitting on the front lawn. We are in big trouble.
Let's see the Federal Reserve is buying $80 billion of worhtless assets each month now from busted out mortages to US T-bills.
no wonder the stock market is taking off.
only trouble is that it is a bubble that is going to go pop any moment now.
Bernanke and the others have replaced the economic law of supply and demand with the new “the rich banker always wins” law of economics. For this new law to work the government must continually prop up asset and commodity prices to assure the rich bankers always “make” money.
This does look a lot like 07. Artificial interest rates, government solvency being maintained through counterfieting and fed purchase of bad debt on a scale even an idiot would find scary, market driven by flash trading, not investors, more people in the wagon than those pulling it, true economic consequences of Obama just starting to surface and costs escalating daily as groups opt out, especially unions. If it was so frigging good, why did unions work so hard to get it passed?
The squandering of national wealth by Washington is nearly always prefaced by statements proclaiming that a majority of the americans support the program or so polls indicate. That, if true, doesnt mean its wise. If public opinion had any validity in influencing what Washington does, Obama Care would have never passed.
The price of gas went from $3.09 to $3.25 in less than 24 hours at my local station.If oil went down $5.00 tomorrow,it would take a month for gas to come down again.What a bunch of crap !!
Well we don't actually make a PRODUCT in America anymore. All that was offshored and now we make a nifty NEW NON-product......DEBT! Hurrah! Hurrah! Hurrah folks! Yessir step right up...she walks she talks she crawls on her belly like a reptile!! Monetized bundled up and no place to go.
Since nobody seems to care about actual wealth anymore, why doesn't the Fed just print enough toilet paper Benny Bucks to pay off the debt!! What's the difference?? Everytime the Fed prints more, the market just pee-pees all over itself in a big 'rally' anyway. In fact, why do we pay income tax? The Fed can just print a big steaming pile........of Benny Bucks and pay for everything!!!!
....just the beginning of a huge downturn......
Move into cash - let it go down 10-15% and then bottom fish for maximum profits. All we need to start the cycle is one day down of 200 points...then the drops will be exponential!
Good luck everyone and Obama.....thanks for nothing!!
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
The apparel chain takes a hard hit after blaming the weather for its quarterly sales decline. But cold temperatures don't explain the drop in full-year sales as well.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.