If Bad Earnings and Egypt Can’t Sink Market, Will Anything?

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Yesterday the Dow Jones Industrial Average ended its winning streak with its first minus day in nine.  But buyers remained in charge until the Dow fell just minutes before the close as it became apparent that Egyptian President Mubarak would not resign.  The S&P 500 and Nasdaq closed in positive territory despite a lower opening due to disappointing earnings from Cisco Systems (NASDAQ: CSCO ) and Akamai Tech (NASDAQ: AKAM ).

Daily Stock Market News

Dow Jones: -11 at 12,229

S&P 500: +1 at 1,322

Nasdaq: +1 at 2,790

Volume & Breadth

NYSE: 1 billion, advancers/decliners even

Nasdaq: 658 million, advancers/decliners even

Futures & Related ETFs

March Crude Oil: +$0.02 at $86.73; Energy Select Sector SPDR (NYSE: XLE ) +$0.75 at $74.25

April Gold: -$3.00, settled at $1,361.90; PHLX Gold/Silver Sector Index (NASDAQ: XAU ) -$1.80 at $204.49

What The Markets Are Saying

The resiliency of the bull market asserted itself again yesterday.  Despite the disappointment of lower-than-expected earnings from two key technology stocks, Cisco (NASDAQ: CSCO ) and Akamai (NASDAQ: AKAM ), which led to a gap-down lower opening, the market clawed its way to the break-even point at the close and just minutes away from a plus close when events in Egypt brought sellers to the floor of the NYSE.

And the technical condition of the market was enhanced by a strong day from the Dow Jones Transportation Average, which gained a whopping 1.4% and closed just shy of the high made on January 28.  By leaping from the support of the 20- and 50-day moving averages, the Transports have effectively negated a possible non-confirmation with the Industrial Average putting both back on a normal course.  Nevertheless I'd feel a lot better if the Transports would take another leap forward and rush into new high ground - but for now yesterday's turnaround was a superb move in the right direction.

On Fridays I provide the latest results from our "most followed indicators" - both internal and sentiment:

Internal Indicators (MACD, slow stochastic, RSI, momentum):  Even though each of these indicators is in overbought territory, they can go higher and so can the market.  And one of the most reliable internal indicators, MACD, flashed a new bullish signal on Monday suggesting that high may not be high enough.

Sentiment Indicators (Investors Intelligence-Advisors Sentiment [II] and Association of Individual Investors Sentiment Survey [AAII]).  II reports that bulls increased slightly from 52.7% last week to 53.4%, and bears moved to 23.3% from 22.0%. The spread between the two at +30.1% is only slightly changed and is in neutral territory. But the AAII bulls fell 2.1% to 49.4% with the bears unchanged at 26.9%.  Thus the II and AAII numbers appear to offset each other.

Conclusion: Although we are overdue for a correction, the market keeps plowing ahead against all negatives.  The "wall of worry" seems to build with every new crisis and is quickly overcome.  Obviously at some point stocks will take back a portion of the gains made since the breakout of December 10.  But when it comes it will likely be quick and shallow.  As one observer put it, "We could stay out of the market fearing a 5% pullback while the market advances another 7%."

If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: CSCO

Sam Collins

Sam Collins

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