Market Euphoria Isn’t Ready to Quieten Down Yet

On Tuesday, the Dow Jones Industrial Average finally closed above 15,000 for the first time as the S&P 500 continued to set new records.

After several days of anticipation, the Dow Jones Industrial Average (NYSEARCA:DIA) finally closed above 15,000 as Caterpillar (NYSEARCA:CAT) crawled its way to the front with a 2.51-percent gain while pulling the other 29 components far enough across the critical mark. The Dow gained 87 points to finish Tuesday’s trading session at 15,056.20 for a 0.58-percent advance.

Although the S&P 500 (NYSEARCA:SPY) had its usual record-breaking day, the Nasdaq 100 (NASDAQ:QQQ) actually finished in the red.  The S&P 500 climbed 0.52 percent to close at yet another record high of 1,625.96 after setting a new intraday record high of 1,626.03.

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The Nasdaq 100 declined by 0.08 percent to 2,952. The Nasdaq Composite had better luck, advancing 0.11 percent to close at 3,396.63 after setting a 12-year record intraday high of 3,402.24. The Russell 2000 (NYSEARCA:IWM) climbed 0.84 percent to end the day at 967.

The entire tech sector had a bad day as Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), and Google (NASDAQ:GOOG) all fell into negative territory. On the other hand, the stock to own on Tuesday was MercadoLibre (NASDAQ:MELI), which closed with a gain of 17.88 percent.  The “Amazon” of the Amazon beat expectations with quarterly earnings of 40 cents per share on net income of $17.5 million.

In other major markets, oil (NYSEARCA:USO) declined 0.38 percent to close at $34.01. On London’s ICE Futures Europe Exchange, June futures for Brent crude oil  declined by $1.37 (1.30 percent) to $103.66/bbl. (NYSEARCA:BNO). June gold futures declined by $17.30, or 1.18 percent, to $1,450.70 per ounce (NYSEARCA:GLD). Transports lit the afterburner on Tuesday, with the Dow Jones Transportation Index (NYSEARCA:IYT) surging 1.60 percent.

European stocks advanced as earnings reports from the financial sector beat expectations (NYSEARCA:VGK). HSBC (NYSE:HBC), Société Générale, Commerzbank, and Allianz were the biggest winners.

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The Euro STOXX 50 Index finished with a 0.67-percent climb to 2,769 — remaining above its 50-day moving average of 2,660. After breaking above its overhead resistance level of 2,700 on January 21, the STOXX 50 immediately retreated and spent the next three months trying to surpass that barrier.

In Japan, stocks soared to their highest level since June 2008 after the stock market opened for the first time since the Golden Week holiday. The rally was apparently motivated by Friday’s non-farm payrolls report from the United States as well as continued weakening of the yen. The Nikkei 225 Stock Average skyrocketed an enormous 3.55 percent to 14,180 (NYSEARCA:EWJ).

In China, stocks advanced in anticipation of a favorable trade balance report, which will be released on Wednesday. The Shanghai Composite Index advanced 0.20 percent to 2,235 (NYSEARCA:FXI). Hong Kong’s Hang Seng Index climbed 0.58 percent to 23,047 (NYSEARCA:EWH).

Technical indicators reveal that the S&P 500 is climbing further above its 50-day moving average of 1,562 after hitting a new record-high close of 1,625.96 — motivating bears to hope that we are watching the formation of a head-and-shoulders pattern, which would signal a decline.  Its Relative Strength Index advanced from 64.91 to 66.99, just below the threshold level of 70.

Most investors consider a Relative Strength Index above 70 as an “overbought” signal.  The MACD continues to make a further break above the signal line, suggesting the likelihood of a further advance.

For the day, most sectors finished solidly in positive territory, except for technology, which slipped into the red by 6 basis points. After breaking out of a losing streak, utilities led the group, followed closely by materials and industrial.

Consumer Discretionary (NYSEARCA:XLY):  +0.84 percent

Technology (NYSEARCA:XLK):  -0.06 percent

Industrials (NYSEARCA:XLI):  +0.92 percent

Materials (NYSEARCA:XLB):  +0.93 percent

Energy (NYSEARCA:XLE):  +0.72 percent

Financials (NYSEARCA:XLF):  +0.52 percent

Utilities (NYSEARCA:XLU):  +0.97 percent

Health Care (NYSEARCA:XLV):  +0.32 percent

Consumer Staples (NYSEARCA:XLP):  +0.78 percent

Bottom line: Despite the fact that the tech sector had a bad day, all other sectors rallied, sending the Dow Jones Industrial Average to its first close above 15,000 as the S&P 500 also set new records for intraday and closing highs.

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John Nyaradi is the author of The ETF Investing Premium Newsletter.

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