Stocks started Thursday on a positive note due to a
better-than-expected weekly jobless claims number. But the S&P
500 ran into technical resistance at its 1,055 line as soon the
Federal Reserve of Kansas City released a report showing a slowdown
in manufacturing activity in its district. A broad round of selling
ensued, and the Dow closed below the psychologically important
10,000 mark for the first time since early July.
But even though the broad market took another hit, metals made
gains. Diversified metals and miners rose almost 0.6%, and gold
stocks jumped 1.2%.
Barrick Gold Corporation
) rose 2.22%, and
) was up 1.42%.
Technology stocks were the worst performers, down 1.1%. The
biggest decliner on the Dow Industrials was Cisco Systems Inc.
), off 1.93%.
International Business Machines
) fell 1.83% and
) was down 1.57%.
The Boeing Company
) rose 0.9% on news that it will double the number of employees at
its parts factory in China. Other Dow stocks showing a gain were
American Express Company
United Technologies Corporation
The U.S. dollar and yen fell versus other currencies due to a
rumor that the two countries might reveal plans for more monetary
easing. And the euro rose following a successful debt issue from
At the close, the Dow Jones Industrial Average fell 74 points to
9,986, the S&P 500 was off 8 points at 1,047, and the Nasdaq
lost 23 points at 2,119.
The NYSE traded just over 1 billion shares with advancers ahead
of decliners by about 2-to-1. The Nasdaq crossed 520 million
shares, also with advancers ahead by about 2-to-1.
Crude oil for delivery in October rose 84 cents to $73.36. The
Energy Select Sector SPDR
) closed at $50.78, off 46 cents.
December gold fell $3.60 to settle at $1,237.70 an ounce, and
PHLX Gold/Silver Sector Index
) gained 2.99 points to 180.38.
What the Markets Are Saying
Even though the major indices fell yesterday, they managed to
still stay above their absolute breakdown points. Despite the
negative response to the good jobs numbers in what should have been
an up day for the markets, the summer of 2010 is still stuck at
S&P 1,040 to 1,060.
However, the bulls can't sustain many more days of selling, as
the key indices are now within a fraction of a percent of the
support lines that mark the lower end of important zones for each.
In times like this, our internal and sentiment indicators can often
help to clarify things.
Currently every major internal indicator is oversold, although
not as oversold as in the May retreat. But sentiment is another
story. The AAII Sentiment Survey, a contra indicator, is as
oversold as the July survey with the bulls now at 20.74% and bears
at 49.47%. And the other contra indicator, the Investors
Intelligence Advisor Sentiment, showed that, "After an 8.4% drop in
two weeks, the bulls ended at 33.3%, down from 36.7% last time."
The number of bulls is "typical of a correction bottom."
As the "wall of worry" builds, investors continue to buy bonds
and avoid stocks at what is an alarming rate to some analysts. Many
are calling the current bond buying spree a bubble, and it does
have some of the characteristics of an overbought situation.
Recently, IBM easily raised $1 billion by issuing a three-year bond
with a record low yield of 1%. And some companies are even
bonds with a 100-year maturity
This buying spree was most recently fueled by Fed Chairman Ben
Bernanke's comment of "unusual uncertainties" in the economy. At
the time, I pointed out that there is nothing more abhorrent to an
investor than uncertainty, and for the Fed Chairman to use the term
is almost unheard of.
The indices now sit at the bottom of major support zones. The
public is bearish, the Fed is uncertain, and everyone wants to buy
bonds. With all of the bricks in the wall of worry in place,
perhaps we will finally see a meaningful bounce in stocks. But if
you buy, don't forget to put a stop-loss order in with your
purchase, just in case "the herd" has got it right and stocks head
Get one stock I think is a good buy now.
Today's Trading Landscape
Earnings to be reported before the opening
Frontline and Tiffany & Co.
Economic reports due:
GDP (the consensus expects 1.3%), corporate profits and consumer
sentiment (the consensus expects 69.6).
If you have questions or comments for Sam Collins, please
e-mail him at
26 Broken Stocks to Sell Now -
There's a long list of companies that have jumped off their
lows but are still trading at dirt-cheap prices. But BEWARE:
These "bargain" stocks aren't just cheap, they're broken.
Get their names here or risk losing your