Believe It or Not, the Bulls Still Have Plenty of Muscle

(Photo credit: Concentrated Passion)

Russell, NYSE Composite still pushing upward

By Sam Collins, InvestorPlace Chief Technical Analyst
New York, Sept.26, stocks to watch .- The S&P 500 closed lower for the fifth consecutive session Wednesday, marking the longest losing streak of the year for the broad-based index. Since it scored a new high last Thursday, the index has fallen 1.9%.

The Dow Jones Industrial Average also fell, suffering from the impact of a 1.45% decline in the shares of Walmart (WMT). Early yesterday the giant retailer was reported to have cut its orders from suppliers, but the report was labeled as “misleading” by a company representative.

A better-than-expected durable goods report for August and an increase in the sale of new homes in August helped to offset wrangling on Capitol Hill. No agreement over the debt ceiling appears near, and funding runs out at midnight on Sept. 30.

At the close, the Dow Jones Industrial Average was off 61 points at 15,273, the S&P 500 fell 5 points to 1,693, and the Nasdaqgave up 7 points to fall to 3,761. The NYSE traded 641 million shares and the Nasdaq crossed 428 million. On the Big Board, advancers and decliners were close to even, and decliners edged out advancers on the Nasdaq by 1.1-to-1.

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The Russell 2000 made a new all-time high yesterday with its intraday high of 1,082. The Russell 2000 — like its cousin, the Nasdaq (see Wednesday’s chart and comment) — is trading within a bull channel, but unlike the Nasdaq, it has no resistance above it to hamper further new highs. MACD is slightly overbought but could become more overbought as the index continues its dogged advance.

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The NYSE Composite is a broad-based index containing all stocks traded on the Big Board. Its chart pattern is much like that of the S&P 500 (see Monday’s chart), which recently made a new all-time high. But the NYSE’s new high at 9,906 — made last Wednesday — was unlike the S&P 500 in that it has not seen a new high since May, and its all-time high at 10,387 was made in October 2007.

Conclusion: Despite yet another down day, the short-, intermediate- and long-term trends still are bullish. The continuing power of the bull market is supported by both the broad-based indices as well as the small- and midcap stocks. The ability to keep trudging along despite the overwhelming negativity coming from Washington is a powerful argument in favor of the bulls. Bearish momentum is absent.

The strongest sectors continue to be industrials, tech & biotech, consumer discretionary, biotech, pharma, housing, materials and financials. Bonds and bond substitutes have been the weakest.

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