On Thursday, better jobs data and strong overseas markets
initially drove stocks higher. But late in the afternoon stocks
faded, and the indices closed with only marginal gains.
Japan's Nikkei was up 0.8%, Hong Kong's Hang Seng gained 0.4%,
Germany's DAX advanced 0.9%, and France's CAC was up 1.2%.
Britain's FTSE closed with a gain of 1.2%. The Bank of England kept
rates unchanged, and that had little impact on U.S. trading. Our
gains were likely the result of further stability in the banks of
Ireland and Spain.
Initial jobless claims for the week ended Sept. 4 totaled
451,000, down 27,000. But continuing claims came in at 4.48 million
versus the 4.45 million that was expected.
Financial stocks drove the indices lower in the afternoon
following an announcement by Germany that
Deutsche Bank AG
) may issue stock to raise capital. In short order the S&P 500
took back half of its gains. But financial stocks held their own,
closing higher by 1.2%.
Goldman Sachs Group Inc.
) rose 1.6% after agreeing to a fine of 17.5 million pounds for
violations of the U.K.'s Financial Services Authority. Goldman was
accused of failing to make disclosures about trader Fabrice
Treasuries were lower, and an auction of 30-year bonds had
mediocre results. The euro closed at $1.2688 versus the U.S.
dollar, down from $1.2731 on Wednesday.
At the close, the Dow Jones Industrial Average rose 28 points to
10,415, the S&P 500 gained 5 points to 1,104, and the Nasdaq
gained 7 points to 2,236.
The NYSE traded just 839 million shares with advancers ahead by
1.7-to-1. On the Nasdaq, decliners were slightly ahead on volume of
486 million shares.
Crude oil for October delivery fell 42 cents to $74.25 a barrel
as worries over higher-than-normal supplies continued. The
Energy Select Sector SPDR
) rose 11 cents to $53.96.
December gold fell $6.60 to $1,250.90 an ounce, as investors
gained confidence in the state of the world's economic recovery.
PHLX Gold/Silver Sector Index
) fell 3.33 points to 183.49.
What the Markets Are Saying
It is difficult to draw too many conclusions during a week
shortened by two holidays, first Labor Day and then Rosh Hashanah.
Volume for the week has been paltry and, as expected, volatility
Yesterday, the S&P 500 got as high as 1,110.27, which is
about 5 points lower than its 200-day
. The Dow Industrials had an intraday penetration of the 200-day
moving average at 10,451.55 with an intraday high of 10,476.62, but
it quickly retreated to close about 62 points lower than the moving
average. The 200-day moving average is still the preeminent
resistance to a further advance. However, a slight penetration of
the line, as we saw in both June and August, does not mean that
stocks have changed course. There must be a follow-through that did
not occur with the prior moves above it. So a close higher than
1,131 is the least requirement for a breakout.
But both the S&P 500 and the NYSE Composite did close above
a trendline connecting the April to August highs. This is a mildly
bullish sign and worth keeping in mind. Further advances by either
index, along with more volume, could lead to an attack on the
200-day moving averages.
Yesterday, I noted that the Investors Intelligence showed an
increase in bulls for the Investment Advisors, and that is mildly
bearish for the market. Interestingly, though, the AAII figures
also show an increase this week in bullish sentiment. The bulls
rose to 43.87% from 30.89%, and the bears dropped to 31.61% from
42.21%. Thirteen points is a fairly large move higher in bullish
sentiment in just one week. Combined, these readings are not good
news for buyers of the current rally.
Conclusion: The 200-day moving average for the S&P 500,
which is now at 1,115, is a major resistance number. A break above
it would likely lead to a challenge of the
at 1,131 and 1,130, which is another major area of resistance.
Major resistance lines are formed by blocks of sellers, and thus,
they usually block advances.
With sentiment now telling us that the bulls are likely to fail,
investors should prepare to sell any lagging positions and traders
should review their list of likely shorts and other bearish
Don't be a hero and try to outguess the market since the odds
are greatly against that sort of high-risk guessing.
For an ETF that could score you a quick profit, see my
Trade of the Day
Today's Trading Landscape
Earnings to be reported before the opening
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Economic report due:
If you have questions or comments for Sam Collins, please
e-mail him at
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