Yesterday, a pre-opening report of more jobless claims than
expected doomed the market to a lower opening. And a rebound late
in morning from successful bond offerings in Spain and Italy only
lasted several hours before selling drove the indices lower than
the opening decline.
The worst performer of the Dow Jones Industrial Average was
Merck & Co., Inc.
), off 6.6%, after halting a study of an experimental clotting drug
in which the firm had placed confidence.
The jobs data report hung over the market like a rain cloud
throughout the session. Jobless claims were expected to drop by
2,000 to total 407,000. Instead the jobless number increased by
35,000 to 445,000. The result was especially felt in the materials
sector as metals weakened.
) fell 3%,
) was off 1.7%, and
Freeport-McMoRan Copper & Gold Inc.
) fell 3.1%.
In other economic news, the U.S. producer prices jumped 1.1% in
December. After removing food and fuel, the index rose by just
0.2%, which was in line with most forecasts. The U.S. trade deficit
declined for the third straight month in November. But the gap with
China increased. The Bank of England and the European Central Bank
left interest rates unchanged. And Fed Chairman Ben Bernanke told
CNBC that he expected growth this year to be in the range of
Treasurys rose in price taking the yield on the 10-year note
down to 3.3%. The euro rose to $1.3354, up from $1.3133 on
At Thursday's close, the Dow fell 24 points to 11,732, the
S&P 500 was off 2 points at 1,284, and the Nasdaq fell 2 points
Crude oil for February delivery fell 46 cents to $91.40 a
barrel, and the
Energy Select Sector SPDR
) fell 20 cents to $69.89. February gold rose $1.20 to settle at
$1,387 in reaction to the rise in jobless claims. The
PHLX Gold/Silver Sector Index
) fell 7.41 points to 208.74, continuing from the break of its
50-day moving average last week. The next support for the XAU is at
What the Markets Are Saying
With the stock market closed on Monday for Martin Luther King,
Jr. Day, it will be interesting to see if today traders decide to
cap some of their gains prior to the three-day weekend.
Yesterday's mini pullback doesn't change any trends. It was an
extension of the selling that began at noon on Wednesday and
continued throughout yesterday until a bounce at the end of the day
bumped into a resistance line drawn from Wednesday's high. If
stocks close higher today, that line will evaporate.
In line with my recent comments on when to sell, today we'll
consider the most talked about but least understood reversal of all
- the head-and-shoulders. Readers will remember the pseudo
head-and-shoulders top in the S&P 500 that occurred this past
summer. The top has some very strict rules that I pointed out at
that time: Left shoulder volume higher than either the head (top)
or the right shoulder, and a 3% penetration of the neckline. Going
back to July 2, I observed, "But, in order to have a confirmed
head-and-shoulders, we must have at least a 3% penetration of the
neckline." The pseudo head-and-shoulders of July fell 2.5%, just
missing the final ingredient of a completed signal by 0.5%. But
that small margin was enough to abort the entire formation and the
S&P 500 turned north." In other words, I disagreed with other
technicians saying that the reversal down had been thwarted and
that the uptrend was still intact.
Today, we will also talk about another type of
head-and-shoulders, but this time it is the bullish
head-and-shoulders bottom that is illustrated in today's
Trade of the Day
Today's Trading Landscape
To see a list of the companies reporting earnings today,
For a list of this week's economic reports due out,
If you have questions or comments for Sam Collins, please
e-mail him at