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Nasdaq Edges Higher but Momentum Turns Negative

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Nasdaq Edges Higher but Momentum Turns Negative

Stocks in the US started the trading session on a soft note as investors continue to look for an impetus to generate upward momentum. Despite a conviction that the Federal Reserve will continue to keep interest rates decisively low for the foreseeable future, earnings guidance continues to be relatively tame, making it difficult for stock investors to see additional upside. The Nasdaq was the best performing major indices closing in the black after a bumpy session. On Friday investors will need to absorb US employment for October which is likely to be skewed given the October government shutdown.

Recent data including today’s ISM services report, will likely keep the Fed on the sidelines and the tapering argument geared toward the middle of 2014. It is unlikely that the new Fed chairwoman will start her tenure with a change in policy, and will probably be a strong steward of the current policy keeping rates extraordinarily low while continuing to purchase 85 billion worth of bonds per month.

In the retail space, Michael Kors (NYSE:KORS) reported second quarter net income of $145.8 million, or $0.71 per diluted share. Revenue increased 38.9% to $740.3 million from $532.9 million. Analysts expected $0.68 per share on $727 million in revenue. Guidance was also positive. The company expects third quarter total revenue to be in the range of $845 million to $855 million. This assumes a comparable store sales increase in the range of 15% to 20%.

The Nasdaq moved higher but momentum has turned negative as the MACD (moving average convergence divergence) index generated a sell signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread. The RSI is still printing near 69 which is on the upper end of the neutral range.

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