To say that lately the stock market has been overly sensitive to
news is an understatement. Tuesday, a barrage of bad news turned
stocks lower, and yesterday it was the lack of bad news and a few
favorable announcements that drew buyers back to stocks.
Both days resulted in triple-digit moves for the Dow
Industrials, but in different directions, as high volatility with
lower-than-normal volume continued to plague long-term investors
and favor traders.
Following a mediocre start yesterday, news that pending home
sales for April made a 6% increase was the trigger for buyers to
rush into the market. And the lack of any news, good or bad, from
the Gulf of Mexico helped stabilize the beaten down energy complex.
) rose 3.1%,
) was up 2.57%, and
) gained 2.55%. The
Oil Service HOLDRS Trust
) rose 6.15%, its best gain of the year.
Financial stocks began yesterday's buying spree, and they were
up 3%, second only to the energy group, which gained 4.3%.
American Express Company
) led the Dow Industrials with a gain of 4.36%,
JPMorgan Chase & Co.
) rose 3.27%, and
Bank of America
) was up 3.05%.
The U.S. dollar fell versus the euro, which closed at $1.2240 on
news that eurozone banks had placed a record E316.4 billion ($387.1
billion) in the European Central Bank's ultra-safe overnight
At the close, the
Dow Jones Industrial Average
) was up 226 points to 10,250, the
) rose 28 points to 1,098, and the
) gained 59 points to 2,281.
The NYSE traded 1.4 billion shares with advancers ahead of
decliners by almost 5-to-1, and on the Nasdaq, advancers were ahead
by over 4-to-1 on volume of 656 million shares.
Crude oil for July delivery fell $1.39 to $72.58 a barrel in a
volatile session that ended with traders unconvinced of a
turnaround in global demand, despite encouraging economic data. The
Energy Select Sector SPDR
) rose $2.19, closing at $52.72.
August gold fell $4.30 to $1,222.60 an ounce, and the
PHLX Gold/Silver Sector Index
) rose 4.01 points to 177.03.
What the Markets Are Saying
Yesterday's rally appeared to impress the bulls. So much so that
the evening pundits were proclaiming that the bear had been
defeated as a result of stocks turning away from the flash cash low
of S&P 500 1,040 with a series of reversals.
Well, that may impress some of the calves, but us old fellas
have seen enough bear attacks and bear traps to be suspicious of
eight volatile days of trading that so far have failed to make a
single penetration through the resistance of the 200-day moving
average, now at 1,107.12, that was broken on May 20.
The power of a trend line that has
five supporting points
from which there have been three genuine upside reversals can't be
denied. But neither should we conclude that the market is
definitely headed higher, since there can only be a limited number
of buyers at any support point. Most technicians consider three
attempts at a support line to be the most that bulls should depend
on before the support collapses, and this one has five.
Michael Ashbaugh said points of the following in his daily
- In early May, the S&P topped just under its 50-day moving
average, leading to a 21-to-1 downdraft.
- On the ensuing recovery attempt, the S&P topped just
under the January peak, leading to an 8-to-1 downdraft.
- And following this most recent test -- the failure at the
200-day moving average -- the S&P staged a 12-to-1 downdraft
on Tuesday (May 25).
"So very simply, this is not bullish price action."
The market has been very sensitive to news, both good and bad,
which is an indication that stocks are in weak hands and/or
controlled by day traders.
Since the next major news announcement is this Friday's jobs
report, I'd wait to evaluate its impact on the market. Let me say
it again: "its impact on the market." In other words, I'm less
focused on the report itself than I am on the market's response to
it. If the report is good, then the market should rally. However,
if the report is good and the market falls, then Mr. Market is
telling us that the next major move will favor the bears since
there is nothing worse at a key support line than a bearish
response to a bullish report.
Today's Trading Landscape
Earnings to be reported before the opening
America's Car-Mart, Charming Shoppes, Joy Global, Suntech Power and
Earnings to be reported after the close include:
China Finance Online, Comtech Telecommunications, Cooper Companies,
Dyncorp International, Martek Biosciences, Quiksilver, SAIC and
Economic reports due:
chain store sales, Monster Employment Index, ADP employment report,
jobless claims (the consensus expects 450,000), productivity and
costs (the consensus expects 3.4% for non-farm productivity and
-1.3% for unit labor costs), factory orders (the consensus expects
1.8%), ISM non-Manufacturing index (the consensus expects 55.9),
EIA natural gas report, EIA petroleum status report, Fed balance
sheet and money supply.
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