The Dow Jones Industrial Average's (
) eight-day winning streak ended Friday when profit-taking and a
quadruple witching expiration day
converged to set the most-watched index off 0.4% for the day. But
it was up 0.86% for the week and 5% for the month.
There was little in the way of news Friday to account for the
selling, except that the U.S. dollar rose 0.6% and was up 0.7%
Thursday. The dollar's strength is attributed to continued problems
in Greece and, thus, more difficulties for Europe and the euro.
The health care group saw gains as the vote on a health care
bill neared and the prospect of ending the uncertainty surrounding
the bill was in view. Aetna (
) rose 3.7% Friday, UnitedHealth Group (
) was up 2.4%, WellPoint (
) gained 2%, and Health Net (
) was up 1.6%. The health care billed passed last night in a vote
There was just one significant earnings report Friday, and that
was for smartphone maker Palm (
). PALM plunged almost 25% onworse-than-expected earnings and lower
revenue forecasts. Some analysts even cut their price target to
zero in response to the report. The small-cap Russell 2000 Index (
) fell 1.1% in reaction to Palm's problems.
The dollar's strength had a negative impact on commodities and
the stocks associated with them. Small-cap energy was hard hit, as
was the materials sector, which fell 1%. The energy sector was off
At the close, the Dow was down 37 points to 10,742, the S&P
) fell 6 points to 1,160, and the Nasdaq (
) was down 17 points to 2,374.
The NYSE traded just under 2 billion shares with decliners ahead
of advancers by over 2-to-1. The Nasdaq had one of its heaviest
volume days of the year, trading 1.1 billion shares with decliners
ahead by 8-to-5.
Crude oil for May delivery fell $1.57 to $80.97 a barrel, and
the Energy Select Sector SPDR (
) fell 90 cents to $57.28.
April gold fell $19.90 to $1,107.40 in response to the strong
dollar and an interest rate increase from the Bank of India. The
PHLX Gold/Silver Sector Index (
) lost 2.61 points and closed at 165.99, which put it on its 20-day
moving average, but with a sell signal from its stochastic
indicator. Support for the XAU is now at the 200-day moving average
What the Markets Are Saying
Friday's flat market with high volume may at first seem like
just another odd witching day close. Volume and volatility are the
hallmark of the conjunction of four classes of options all expiring
on the same day. But Friday was different in at least one respect,
and that was the sharp downturn of the small- and mid-cap stock
indices and their subsequent impact on the Nasdaq.
The leading indices of the recent rally from early February --
the Russell 2000 and the S&P 400 MidCap Index (
) -- were sharply lower on Friday.
Even though they haven't penetrated their respective near-term
trendlines, the impact of the pullback in the stocks of those
indices did affect the Nasdaq. And the Nasdaq executed a minor
reversal down. Furthermore, another lower close under Friday's
final number for the Russell and the S&P would break their
near-term trendlines and no doubt force a further retreat on the
Nasdaq back to its first line of support at the conjunction of its
20-day moving average and its near-term support line at 2,314.
It would be wise for investors to be very cautious with regard
to the immediate outlook for the market. With momentum, sentiment
and all other internal market readings now very overbought, a path
downward is much more probable than a continuation of daily
It is time to be defensive, and that means investors should do
1. Take short-term profits.
2. Sell those stocks that have not participated in the
3. Raise cash.
Stocks are probably not due for a major reversal like the 9%
correction in February, but could easily fall to the S&P 500's
50-day moving average now at 1,113. A pullback of 4% to 5% would
provide us with an excellent opportunity to put cash back to work
prior to the next major advance.
Today's Trading Landscape
Earnings to be reported before the opening
China TransInfo Technology, Stealthgas, Tiffany & Co. and
Earnings to be reported after the close include:
DXP Enterprises and Phillips-Van Heusen.
There are no significant economic reports due today.
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