Dow 13,100, S&P 1,400 and Nasdaq 3,000, What’s Next?

Monday’s bullish trading session on thin volume fades in final thirty minutes.

The major American stock indices spent most of Monday well above Friday’s closing levels.  At 10:38 EDT, the Dow was up by 87 points.  Again, just before 1:30 the Dow appeared ready to hit a new high for the day.  Encouraging news about a bond-buying plan by the European Central Bank combined with better-than-expected earnings reports from a number of companies to give investors a good day.

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Nevertheless, at 3:35 the sell-off began, with the S&P and the Dow unwinding more quickly than the Nasdaq.  By the closing bell, the Dow was back down to 13,117 with only 21 points (0.16%) above Friday’s closing level.  Sixty points disappeared in the last half-hour of the session.  The S&P 500 fared a tad better with a 0.23 percent gain for the day, closing at 1,394 (NYSEARCA:SPY).  The Nasdaq held a strong gain of 0.74 percent to finish at 2,989 (NASDAQ:QQQ) and the Russell 2000 achieved an identical result, finishing the day at 794, with a gain of 0.74 percent (NYSEARCA:IWM).

In Europe, stocks had a good day after Germany sent some signals that it was not averse to a bond-buying program by the ECB.  The Euro STOXX 50 Index finished Monday’s session with a 1.13 percent gain.  The FTSE 100 Index had to settle for a more modest 0.37% advance.

European ETFs did well on Monday.  The iShares Germany Index (NYSEARCA:EWG) picked up 0.82 percent.  The iShares Spain Index (NYSEARCA:EWP) gained a whopping 4.05 percent and the iShares Italy Index (NYSEARCA:EWI) picked up 2.02 percent on the hopes that they would both benefit from the ECB bond-buying effort.

As of 5:26 EDT, the euro declined 0.03% against the dollar, trading at $1.2397(NYSEARCA:FXE).

Spain’s ten-year bond yield dropped as low as 6.72 percent on Monday from Friday’s closing level of 6.87 percent.  Spain’s two-year bond yield made a steeper decline on Monday, falling to 3.36 percent from Friday’s closing level of 3.89 percent (NYSEARCA:EWP).

Italy’s ten-year bond yield fell to a low of 6.01 percent on Monday from Friday’s closing level of 6.01 percent (NYSEARCA:EWI).

On London’s ICE Futures Europe Exchange, September futures for Brent Crude Oil advanced by 71 cents (0.66%) to $108.16/bbl. (NYSEARCA:USO).

August gold futures advanced by $4.10 (0.26) to $1,610.10 per ounce (NYSEARCA:GLD).

On Tuesday, the Bureau of Labor Statistics will release the Job Openings and Labor Turnover Survey (JOLTS) and the Federal Reserve will provide us with the Consumer Credit report for June.

Bottom line:  Despite strong advances on Monday, the major American stock indices experienced a significant sell-off during the last half-hour of the session, as thin trading volume undermined investor confidence.

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