On Monday, stocks opened lower following an overnight rise in
the U.S. dollar and concerns over the sovereign debt of the PIGS
(Portugal, Ireland, Greece and Spain). Most of the day was spent
making up for the initial losses, and the market closed modestly
lower. It was the first loss for the Dow Jones Industrial Average
in seven sessions.
With a general lack of economic news, the markets were set up
for some profit-taking following Thursday's breakout and a gain for
the week of 2.9%. Earnings seemed to have little to do with the
overall direction of the market.
In corporate news,
) jumped 4.7% following a Wall Street Journal report that the
company was "exploring options," one of which was a possible
) rose 9.5% as a result of an announced sale of its distribution
business to TPG Inc. for $93 million.
General Steel Holdings, Inc.
), the Chinese steel company, fell 6.8% after a Q3 earnings
) said that sales growth in October rose 6.5%, but the stock only
gained a penny, while
The Boeing Company
) announced more delivery delays of its Dreamliner, and the stock
fell over $1.
The commodity complex was strong despite the dollar's gains,
with the CRB Index up 0.5%. And technology stocks were the only
other major sector to show a gain led by
Cisco Systems, Inc.
), which was up in advance of its earnings report on Wednesday.
Financials were the weakest sector, off 0.8%.
The euro fell 0.8% against the dollar at $1.3923 versus $1.4034
on Friday. The 10-year Treasury note closed at a yield of 2.55%, up
slightly from Friday.
At the close, the Dow Jones Industrial Average was off 37 points
at 11,407, the S&P 500 fell 3 points to 1,223, and the Nasdaq
gained a point at 2,580. The NYSE traded 908 million shares, while
Nasdaq exchanged 489 million shares. On both exchanges, decliners
were ahead by about 1.2-to-1.
Crude oil for December delivery rose 21 cents to $87.06 a
Energy Select Sector SPDR
) gained 19 cents, closing at $62.50. Gold closed above $1,400 an
ounce for the first time with the December contract up $5.50 to
PHLX Gold/Silver Sector Index
) rose 5.26 points to a new closing high of 220.17.
What the Markets Are Saying
Yesterday, we noted that the massive breakout last week of the
major indices gave the following upside targets:
S&P 500 1,313 (August 2008 high) Dow 11,933 Nasdaq 2,728
(December 2007 high)
Immediate support now reverts to the last resistance lines, so
the S&P's immediate support is at the April 23 closing high of
1,217, and then 1,190, which is midway in the support zone of 1,174
to 1,210. For the Dow, the first support is at 11,205, and then
11,000 to 11,155. The Nasdaq's support is quite different because
of its strong performance. Its first support is the bottom of a gap
opened on Thursday, which is Wednesday's high at 2,541, and extends
down to 2,535. Then there is a wider band from 2,480 to 2,535.
Our internal and sentiment indicators are now extremely
overbought, so the market is probably going to pull back before
resuming its uptrend.
Mark Arbeter of S&P puts it this way: "The stock market
blasted off late last week, propelling the major indices to new
recovery highs. However, the market is extremely overbought, and,
in our view, now is no time to chase prices higher. We believe that
the U.S. Dollar Index's break to new corrective lows last week was
a major catalyst for the spike in stock prices, but the dollar has
bounced and may be attempting to trace out at least a short-term
bottom. The prospect of the long-awaited counter trend rally in the
dollar may finally represent the impetus for a cooling off period
for stocks, in our view."
But yesterday's strong move on the part of commodities in the
face of a higher dollar is a dramatic change in relationship. It
tells us that futures and especially precious metals may have
embarked on a powerful new leg higher.
In a Wall Street Journal article titled "Gold Arches Ever
Higher," Dave Kansas said: "Once the major economies, financial
markets and currencies stabilize, gold will find it tough going.
And when that time comes, a lot of true believers will get badly
burned. But with terms like 'currency war' in the air that time
seems some way off yet."
Hang on to your gold stocks since, as Yogi Berra said, "It ain't
over 'til it's over."
To get our new target for gold ETF GLD, see the
Trade of the Day
Today's Trading Landscape
To see a list of the companies reporting earnings today,
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