Major markets and index ETFs hit the ceiling again today as the Dow failed to break past the 13,000 mark once more. Major markets have seen a solid rise since the beginning of the New Year, however they began to face significant resistance last week and today, and the question remains: will the Dow break 13,000 and lead the S&P 500, Nasdaq, and Russell 2000 even higher or slip into obscurity and delight the bears?
For a market summary, the S&P 500 closed .14% higher today, while the Dow Jones Industrial Average lost .01%; the NASDAQ Composite gained .08% while the Russell 2000 lost .03%. Index ETFs followed along as the SPDR S&P 500 ETF (NYSEARCA:SPY) gained .17%, the SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA) gained .03%, the PowerShares QQQ Trust Series 1 ETF (NASDAQ:QQQ) added .14%, and the iShares Russell 2000 Index ETF (NYSEARCA:IWM) lost .17%. As indicated by the numbers, both markets and index ETFs are high and flat, struggling to break through significant resistance to the next level.
So will markets punch through the wall or slide to the floor?
Hard to say, as the Standard & Poors Ratings Agency just downgraded Greece to “selective default” status. Whether this downgrade pans out to be another “cry wolf” or actual threat in the eyes of investors is anyone’s bet, since the German Parliament just gave Chancellor Merkel her Greek bailout money; this downgrade might be a recent example of how credit ratings agencies have lost their clout and like to make a lot of useless noise. On the other hand, US markets have climbed steadily in the New Year despite Greece, however we all know what kind of havoc Greece has wrecked on global markets since the country turned up sick. The fact that Europe ETFs cratered today might shed some light on how another Greece downgrade will affect markets tomorrow.
Overall US economic indicators continue to improve however, which could suggest that the Dow will punch through 13,000 and lead other markets to the green. Today’s home sales and Texas Fed reports turned in positive numbers, while our precious gold dropped .34% to close at $1769.70 per ounce. A drop in gold perhaps suggests that investors are feeling more confident in the economy and thus do not feel the need for “safety” in gold (NYSEARCA:GLD).
Oil and oil ETFs also made the news today as oil prices broke their 8 day gains by dropping nearly 1% and closing out at roughly $108 per barrel. The United States Oil Fund LP ETF (NYSEARCA:USO) shed off nearly 2% today, what a move and a negative move at that. The continued rise of oil prices has analysts worried about the affect of oil prices on the US and Europe recovering economies, so long as Iran remains defiant over western nuclear weapons sanctions, oil will likely continue to soar.
Bottom Line: Markets and ETFs continued to hit the ceiling today as significant resistance persists. Tomorrow could go either way depending on how investors react to oil prices, tomorrow’s economic reports, and the new Greece “selective default” status. Either way, markets seem to be having a hard time breaking through the ceiling, particularly the Dow, which has still yet to close above 13,000.
John Nyaradi is the author of The ETF Investing Premium Newsletter.
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