The U.S. stock market jumped 3.9% on Monday, following a deal by
the European Union (
), the International Monetary Fund (
) and the European Central Bank (
) to bail out not only Greece but other European countries, as
well. The $955-billion program resulted in broad gains in Europe's
major indices and set the stage for the strongest opening in U.S.
stocks so far this year.
It was reported on CNBC that even before our stocks opened the
ECB had already been buying eurozone national bonds to inject
capital into their system. And it was generally conceded that,
despite the long-term costs, the move avoided the dreaded contagion
that spooked the markets last week.
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Stocks were strong during the entire session with all 30 of the
Dow Industrial components gaining. The strongest movers in the Dow
), up 7.39%,
General Electric Company
), up 6.99%,
Bank of America Corporation
), up 6.98%,
The Boeing Company
), up 6.85%, and
Cisco Systems, Inc.
), up 6.19%.
On the broad market, industrials gained 5.7%, financials rose
5.6%, consumer discretionary was up 5.3%, and technology gained
But despite the gains, there were many who said that the sharp
jump in prices was just a relief rally. And other joined in
pointing out that there was evidence of mass
. But more than 98% of the stocks on the S&P 500 (
) rose and drove the index to its best gain in more than a
At the close, the Dow Jones Industrial Average (
) gained 405 points to 10,785, the S&P 500 rose 49 points to
1,160, and the Nasdaq (
) gained 109 points to 2,375.
The NYSE traded 1.9 billion shares with advancers over decliners
by almost 10-to-1, and the Nasdaq crossed 839 million shares with
advancers ahead by 7-to-1.
Crude oil for June delivery rose $1.69 to $76.80 a barrel, and
Energy Select Sector SPDR
) gained $2.35 to close at $57.34.
June Gold fell $9.60, closing at $1,200.80 an ounce. The
PHLX Gold/Silver Sector Index
) fell 2.71 points to 171.88.
What the Markets Are Saying
What a ride it has been since last Tuesday's (May 4) mild
pullback of "just" 225 Dow points. We pointed out in
Daily Market Outlook
that our proprietary internal indicator, the Collins-Bollinger
), had given a strong sell signal, and that a number of other
indicators were telling the same story: sell.
On Wednesday, I said, "Yesterday the coup de grace was
administered when the S&P 500, Nasdaq and NYSE Composite broke
cleanly through their respective 50-day
… The goal of this correction is nothing less than a test of the
January/February low at 1,044."
But I was as surprised as everyone else that the test of the
February low would take just two days to be accomplished, leaving
everyone shell-shocked by Friday.
Now, with a big rally under their belts and Greece saved by the
wealthier nations of Europe, the bulls are bellowing that the
crisis is over. Stocks must surely revert back to the primary
trend, which is up.
Well, hold your horses, cowboy. It seems to me that history is
replete with dead cat bounces that were nothing more than short
Yesterday's volume was high by 2010's standard, but low compared
to the declining days since the breakdown last week. Since May 4,
the NYSE had four straight days down with a total volume traded of
8 billion shares. However, it is true that in the last two hours of
both Thursday and Friday, there was some buying.
So let's say that instead of 8 billion shares, sellers accounted
for just 6 billion shares. Yesterday's 1.9 billion, 80% of which
was "up volume," or 1.5 billion shares, hardly compares with an
estimated total of 6.4 billion shares traded down since last
Now with the major indices approaching significant overhead
resistance, the bulls will have to put together a major advance.
The barrier that they face first is at the 50-day moving averages
at Dow 10,846, and then the top at 10,875. For the S&P 500, it
is the 50-day at 1,172 coupled with the top at 1,170. The Nasdaq
must first face the overhead at 2,320 to 2,421 and the 50-day
within that zone at 2,412. (Learn more about the major
Today the stock market may tell us just how good or bad the news
from Europe really was.
Today's Trading Landscape
Earnings to be reported before the opening
Allot Communications, BPZ Energy, Church & Dwight, Cobalt
International Energy, CommVault Systems, Delta Petroleum, Fossil,
GeoResources, Invesco Mortgage Capital, JA Solar, Maidenform
Brands, NeuroMetrix, Nice Systems, Northgate Minerals, Origin
Agritech, SmartHeat, Susser and Winner Medical.
Earnings to be reported after the close include:
A123 Systems, American Science & Engineering, Archipelago
Learning, Carrol's Restaurant Group, China Digital TV, Ctrip.com,
Electro Scientific, Electronic Arts, Exelixis, Given Imaging, Home
Inns, I.D. Systems, Learning Tree, OPNET, Rick's Cabaret, Seaspan,
STR Holdings, SunPower Corporation, Team Health Holdings and The
Walt Disney Company.
Economic reports due:
NFIB Small Business Optimism Index, ICSC-Goldman Sachs store sales,
Redbook and wholesale trade.
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