KEY
TAKEAWAYS
- Dow Jones Industrial Average closes above 40,000 for the first time
- Commodities such as silver, copper, and gold are moving higher
- Volatility remains low, indicating investors are complacent
It made it! The Dow Jones Industrial Average ($INDU) closed above 40,000 for the first time, another record close for the index. What an exciting week!
And most of that excitement came in the last few minutes of the trading week. We'll take it. After a few weeks of lethargic activity in the stock market, the optimism is back.
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CHART 1. DOW JONES INDUSTRIAL AVERAGE CLOSES ABOVE 40,000. Investors will be looking for the upside momentum to continue next week.Chart source: StockCharts.com. For educational purposes.
A Recap of Stock Market Activity
The stock market regained its mojo on Wednesday, when inflation data came in cooler than expected. It then took a bit of a breather on Thursday and, for the most part, on Friday, but the last few minutes of the trading day did reinject some optimism, which is unusual for end-of-week trading. The stock market got what it wanted, reacted, and then decided to get a head start on the weekend.
Next week, investors will be focused on looking for upside follow-through. Now that interest rate hikes are off the table and it looks like cuts will happen sometime this year, investors have renewed their confidence in the stock market.
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The CBOE Volatility Index ($VIX) continues to be low, further confirming that investors are complacent. $VIX is close to its December 2023 lows, when investors' confidence in equities reignited following the October 2023 lows.
CHART 2. DAILY CHART OF THE VIX. The VIX is close to its December lows, coinciding with the time investors renewed their confidence after the pullback in October.Chart source: StockCharts.com. For educational purposes.
While equities have trended toward the upside, commodities have also broken out. The daily chart of the Invesco DB Commodity Tracking Index Fund (DBC) shows the index has broken out above a downward trending channel, suggesting that the pullback in commodities may be behind us.
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Commodities are inflation-sensitive, and, given that inflation may be cooling, commodities may be breaking out of the flag pattern you see in the chart below.
CHART 3. COMMODITIES BREAKING OUT. Commodities are also showing strength as they break out from a flag pattern.Chart source: StockCharts.com. For educational purposes.
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Copper and silver prices soared on Friday, and gold looks like it's on its way to revisit its all-time highs. Silver saw a significant breakout on Friday. It's worth looking at the chart of iShares Silver Trust ETF (SLV) to get a sense of the breakout magnitude.
CHART 4. SILVER SEES SIGNIFICANT BREAKOUT. The iShares Silver Trust ETF (SLV) has broken above its 2021 high. How much higher can it go? The next resistance is at around $35.Chart source: StockCharts.com. For educational purposes.
SLV has broken out above its February 2021 high. The price action on Friday suggests that price will continue higher next week. The next resistance level could be the 2012 highs, which is around $35, so there's room for upside movement in SLV. If you want to get in on the silver rally, opening a position in SLV may be something to consider. However, be sure to identify your stop losses before entering a trade. Although SLV seems poised to move higher, anything can reverse the move. Make sure you're comfortable with the risk/reward ratios.
SLV is well above its 20-week exponential moving average, and the Percentage Price Oscillator (PPO) shows that momentum is rising. If the trend continues, then SLV could see a strong rally. It's been a while since silver got some love.
And There's NVIDIA
Next week should be interesting. The highlight is NVIDIA's earnings—the company reports on Wednesday after the close. Analysts estimate earnings to come in at $5.57 and revenues at $24.57 billion. If NVIDIA (NVDA) beats, it could be a big catalyst for the markets to move higher. But the worry would be if NVDA misses expectations. A downside move would be of a much greater magnitude than an upside move. NVDA has had a significant impact on the stock market's performance, so just about every investor will be tuned in to the news after the close on Wednesday.
End-of-Week Wrap-Up
- S&P 500 closes up 0.12% at 5,303.27, Dow Jones Industrial Average up 0.34% at 40,003.59; Nasdaq Composite down 0.07% at 16,685.97
- $VIX down 3.46% at 11.99
- Best performing sector for the week: Technology
- Worst performing sector for the week: Industrials
- Top 5 Large Cap SCTR stocks: MicroStrategy Inc. (MSTR); Vistra Energy Corp. (VST); Super Micro Computer, Inc. (SMCI); Robinhood Markets (HOOD); Vertiv Holdings (VRT)
On the Radar Next Week
- Earnings from Nvidia (NVDA)
- Fed speeches
- April Existing Home Sales
- New Home Sales
- May Michigan Consumer Sentiment
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.
Happy charting!
TOPICS: Market Analysis Commodities Equities Trading Strategies
About the author: Jayanthi Gopalakrishnan is Director of Site Content at StockCharts.com. She spends her time coming up with content strategies, delivering content to educate traders and investors, and finding ways to make technical analysis fun. Jayanthi was Managing Editor at T3 Custom, a content marketing agency for financial brands. Prior to that, she was Managing Editor of Technical Analysis of Stocks & Commodities magazine for 15+ years. Learn More
FAQs
The thrill of the Dow Jones Industrial Average breaking 40,000 for the first time in history feels like a distant memory. The blue-chip index has since plummeted over 3% to suffer its sharpest two-week slide in over a month, while the rest of the market has stayed on its upward trajectory.
Which day of the week is best to invest? ›
Historically, Mondays have often been considered a good day to buy stocks, primarily due to the 'Weekend Effect' or 'Monday Effect'. This theory suggests that stock prices tend to drop on Mondays due to negative news released over the weekend.
What is the highest the Dow Jones Industrial Average ever closed at? ›
The Dow rose 134 points, or 0.3%, to close at a record high of 40,003.59. This is the Dow's fifth consecutive winning week. The S&P 500 gained 0.1% and the Nasdaq Composite closed 0.1% lower.
What days of the week are stocks most volatile? ›
During a bear market, Mondays and Tuesdays are most volatile, and stocks tend to fall the most on these days. In contrast, Thursdays are good days to sell because stocks tend to rise during that day of the week.
When did the Dow Jones hit its high point before the great crash? ›
1921–1929: Bull market. Over the next eight years, the Dow increases nearly 500%, and eventually grows to a closing high of 381.17 on September 3, 1929. 1929–1949: Bear market. The stock market crash of 1929, or Black Tuesday, precedes, as well as causes the Great Depression.
What is the 3-5-7 rule in trading? ›
What is the 3 5 7 rule in trading? A risk management principle known as the “3-5-7” rule in trading advises diversifying one's financial holdings to reduce risk. The 3% rule states that you should never risk more than 3% of your whole trading capital on a single deal.
What is historically the best day of the week to buy stocks? ›
Mondays and Fridays tend to be good days to trade stocks, while the middle of the week is less volatile. Historically, April, October, and November have been the best months to buy stocks, while September has shown the worst performance.
Has the Dow ever hit $40,000? ›
Traders work on the floor of the New York Stock Exchange during morning trading on May 17, 2024 in New York City. Passing major milestones such as the 40,000 barrier the Dow Jones Industrial Average eclipsed this week makes for a nice headline, but market experts do not take much else from the move.
Has the Dow ever hit 39000? ›
The Dow Jones Industrial Average (DJIA) hit its record high on May 16, 2024, reaching 40,051.05 points during intraday trading. The Dow's all-time high at market close stands at 39,908.00, reached on May 15, 2024.
What is the highest the Dow has been in 2024? ›
The Dow Jones Industrial Average hit a new high on Thursday, crossing 40,000 points for the first time. At Marketplace, we always say that the stock market is not the economy. But it can say something about how certain people think and feel about the economy.
It is not a hard and fast rule, but rather a guideline that has been observed by many traders over the years. The logic behind this rule is that if the market has not reversed by 11 am EST, it is less likely to experience a significant trend reversal during the remainder of the trading day.
What is the 10 am rule in stocks? ›
Traders that follow the 10 a.m. rule think a stock's price trajectory is relatively set for the day by the end of that half-hour. For example, if a stock closed at $40 the previous day, opened at $42 the next, and reached $43 by 10 a.m., this would indicate that the stock is likely to remain above $42 by market close.
What is the 3 day rule in stocks? ›
The 3-Day Rule in stock trading refers to the settlement rule that requires the finalization of a transaction within three business days after the trade date. This rule impacts how payments and orders are processed, requiring traders to have funds or credit in their accounts to cover purchases by the settlement date.
Has the Dow Jones ever hit $37,000? ›
The Dow Jones Industrial Average hit an intraday record high. The index is up 472 points, or 1.3% to 37049 at last check, reaching over 37000 for the first time. It's up just a little less than the S&P 500 and Nasdaq Composite, which have gained about 1.4% each.
Has the Dow ever hit 38000? ›
Stocks gained on Monday, building on last week's gangbusters rally, with the Dow crossing the 38,000 mark for the first time ever. The Dow rose 138 points, or 0.4%, ending the day at 38,001.81. The S&P 500 gained 0.2% and the Nasdaq Composite added 0.3%.
What is the highest Dow Jones closing ever? ›
The highest closing price for the Dow Jones Industrial Average (DJI) all-time was $40,003.59, on May 17. The latest price is $38,686.32.
Is it better to invest on Friday or Monday? ›
Historically, Mondays have often been considered a good day to buy stocks, primarily due to the 'Weekend Effect' or 'Monday Effect'. This theory suggests that stock prices tend to drop on Mondays due to negative news released over the weekend.
What is the best day to invest in funds? ›
However, some traders and investors believe that markets tend to trend downward on Mondays. This can mean much lower returns on Monday than there were to be had on Friday, making Monday traditionally known as a good day of the week to snaffle up potentially undervalued stocks and indices.
What is the best day of the week to buy weekly investments? ›
If Monday may be the best day of the week to buy stocks, then Thursday or early Friday may be the best day to sell stock—before prices dip.
Which day is best for trading in a week? ›
Strategies for Different Trading Days
The best days for swing trading are usually Wednesday and Thursday, as there is an opportunity to catch trends in the middle of the week. Position trading can be used on Thursdays when economic events determine long-term trends.
