Stocks rallied again yesterday, rising more than 2% in a
broad-based advance that generally mirrored the gains made on the
European exchanges. For example, Germany's DAX gained 2.4%.
Technology stocks led the Dow following a 4.56% gain in
). Big Blue was the subject of heavy buying after its CEO said that
the company would double its earnings to at least $20 a share by
2015. Because IBM is the highest-priced stock in the
Dow Jones Industrial Average
), it has a leveraged impact on the index.
Other blue-chip components were higher, as well, with Intel
) up 3.6%,
Cisco Systems, Inc.
) up 3%,
), up 2.4%, and
) rising 1.9%. The technology sector gained 2.2%.
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Retail stocks were weak early in the session, but
) posted better-than-expected earnings and led the group to a gain
Even as the Senate was debating new restrictive legislation on
mortgage underwriting rules, most banks gained, but some large
banks fell, perhaps, reflecting the debate going on in the Senate
that could result in more restriction specifically on:
JPMorgan Chase & Co.
) which fell 0.3%, and
Bank of America Corporation
), which was off 0.5%.
Gross Domestic Product (
) growth in the 16 countries in the European Union rose 0.2% in Q1,
up from 0.0% in Q4. The report was slightly higher than
At the close, the Dow gained 148 points, closing to 10,897, the
) gained 16 points to 1,172, and the
) gained 50 points to 2,425.
The NYSE traded 1.3 billion shares with advancers above
decliners by over 5-to-1. The Nasdaq traded 631 million shares, and
advancers exceeded decliners by over 4-to-1.
June crude oil fell 72 cents to $75.65 a barrel as a growing oil
glut in the United States cut into prices. The
Energy Select Sector SPDR
) rose 79 cents and closed at $57.75.
Gold for June delivery hit a new record high, and the contract
closed at $1,243.10 an ounce, up $22.80, as concerns continued over
the inflation that might result from the eurozone bailout. The
PHLX Gold/Silver Sector Index
) closed at 186.06, up 1.81 points.
What the Markets Are Saying
It didn't take long for buyers to jump on the quirky prices of
last week, driving the key indices to their former breakdown level.
That level -- the 50-day moving average -- is important to
technicians as a major support/resistance indicator, so when it is
violated, sellers will often act solely on the basis of its
But the dramatic plunge of last Thursday was not the result of a
technical sell-off, but a failure of systems that no one seems able
to explain. When a "glitch" of that magnitude occurs, it fouls up
the data on which we depend for a number of technical indicators.
So technicians must draw upon past experience more than data for
And here's the way I see it: Breakdowns through major moving
averages most often signal that a change in trend is under way. In
this most recent event, the breakdown occurred before the "the
glitch" and, therefore, we should stick with the premise that the
sell signal of May 5, the day before the plunge, had validity. The
spring back is not uncommon, and often occurs giving investors
another chance to sell at prices not available just days before
when panic hit the Street.
So, until the 50-day moving average is violated and then
validated by a close above the 20-day moving averages of the major
indices, we will maintain our sell signal. It is much more than
coincidence that rising prices were stopped yesterday exactly on
the 50-day moving average of the broad-based index , the S&P
500, or just slightly above it for the Dow and Nasdaq.
And it is interesting that the broad-based index that, for me,
has been an invaluable tool, closed yesterday at a considerable
distance from its 50-day moving average. That index is the NYSE
Composite, which, in addition to not reaching the 50-day, even
triggered a trading sell signal as its 20-day moving average
crossed through its 50-day moving average.
The long-term trend is still up, but both the short-term and
intermediate-term trends are down. The cat is still bouncing, but
he is about to be whacked by sellers waiting just above him with a
Today's Trading Landscape
Earnings to be reported before the opening
ADA-ES, American Superconductor, Argon ST, CAE, China Green
Agriculture, E-House China, Elbit Systems, Gildan Activewear,
Kohl's, O'Charley's, Prestige Brands, Teekay Shipping, Urban
Outfitters, VanceInfo Technology and Wendy's.
Earnings to be reported during trading hours
Earnings to be reported after the close include:
Addus HomeCare, Black Box, Blockbuster, CA, Chemspec International,
Cumberland Pharmaceuticals, Exar, ICx Technologies, Medidata
Solutions, Nordstrom, NVIDIA, Quantum, Select Medical and Syneron
Economic reports due:
jobless claims (the consensus expects 440,000), import and export
prices, EIA natural gas report, Fed balance sheet and money
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