On Monday, stocks started low and slow, and ended just as they
began -- with the major indices in decline. Volume was light, and
the market's focus was primarily defensive, even though positive
economic news was reported prior to the opening.
The economic reports were no blockbusters, but they did show
that the economy is in a modest recovery. Real disposable income
for May increased 0.5%, and the personal savings rate increased to
4% from 3.8% in April.
Even two decisions by the Supreme Court that should have had a
positive effect on business had little impact on the broad market.
The Court struck down provisions that created a private regulatory
body to inspect and discipline public company accountants. The
justices also "rejected an appeal by the government which sought to
revive a rejected attempt to get tobacco companies to forfeit up to
$280 billion in profits and pay $10 billion for smoking-cessation
programs" (Wall Street Journal).
Telecom and consumer staples stocks, both defensive sectors,
were strong. Telecom rose 1%, and consumer staples gained 1.1%.
Sprint Nextel Corporation
) gained 6.2%,
MetroPCS Communications, Inc.
) rose 0.8%, and
) was up 0.7%.
The U.S. dollar gained at the expense of the euro, which fell
0.8%. Treasuries were higher with the benchmark 10-year note, up 25
basis points with a yield of 3.01% -- a new 52-week low.
At the close, the
Dow Jones Industrial Average
) fell 5 points to 10,129, the
) was off 2 points to 1,075, and the
) lost 3 points to 2,221.
The NYSE traded 925 million shares with decliners ahead of
advancers by about 9-to-7. The Nasdaq crossed 518 million shares
with decliners ahead by 4-to-3.
Crude oil for August delivery fell 61 cents to $78.25 a barrel
as the first tropical storm of the season appeared to have lost its
Energy Select Sector SPDR
) closed at $51.78, off 71 cents.
August gold fell $17.60 to $1,238.60 an ounce, and the
PHLX Gold/Silver Sector Index
) fell 2.01 points to 183.11.
What the Markets Are Saying
Despite good economic data and two supporting Supreme Court
decisions, the stock market sputtered like a defective July 4th
fireworks rocket. Only two sectors showed strength yesterday, and
both are considered defensive, so the broad market gave another
negative signal telling investors that no matter how good the news,
buyers are not interested in stepping up.
Yesterday was the sixth day down since the high of June 21, if
we count Friday as a minus day. As Q2 grinds to a close, the
quarter has produced the following results: The S&P 500 has
fallen 8.11%, the Dow is down 6.6%, and the Nasdaq has fallen 7.4%.
And Dorsey Wright & Associates reports that only two of their
ETF sectors will close the quarter with gains -- precious metals
Despite the quarterly losses, our internal indicators are not
Moving Average Convergence/Divergence (
is neutral and on the edge of a sell signal, the slow stochastic is
neutral having flashed a sell on June 21, momentum turned negative
on Friday, and
Relative Strength Index (
As we approach the Q2 earnings season, investors are not
confident that the results will match expectations. This could be
good as long as the earnings exceed estimates.
However, if the results are as bad as investors are
anticipating, then the charts of the major indices could be forming
massive head-and-shoulders patterns. Here the key word is "could,"
since the trigger of the head-and-shoulders would be the decisive
penetration of the neckline, which is now at S&P 1,040 to
But don't attempt to anticipate this most graphic of all chart
formations by selling now. The chances are better than even
that the support line will hold, but if it doesn't, we will be
Today's Trading Landscape
Earnings to be reported after the close include:
EXFO, General Mills, Sealy and Worthington.
Economic reports due:
ICSC-Goldman Sachs store sales, Redbook, S&P Case-Shiller Home
Price Index (
), consumer confidence (the consensus expects 63.3), State Street
Investor Confidence Index and farm prices.
If you have questions or comments for Sam Collins, please
e-mail him at
Are You Ready for Dow 9,000?
John Lansing, trading maverick who called the market turn in March
2009, last summer's "rebound rally," gold's meteoric rise and a
continued "bull run" earlier this year, now sees huge trouble
ahead, and then a surprising rally that will take the Dow back to
new all-time highs.
Here's why -- plus how to double your money as the
market plunges and then soars.