Stocks took a hard hit on the opening yesterday, following
better earnings, but a disappointing outlook from the technology
Cisco Systems, Inc.
) and a strong U.S. dollar. And even though the broad market
recovered about half of the losses before the close, technology
stocks were down for the entire session.
The dollar has now advanced for five straight sessions as
investors still flock to it in times of crisis. And the crisis this
week is not a new one, but a return to the problem countries
collectively known as the PIGS (Portugal, Ireland, Greece, and
Spain). The Wall Street Journal pointed out that the latest worry
came about as the costs to insure against default on the debt of
Portugal, Ireland and Spain hit record highs.
Energy, precious metals and materials stocks rose yesterday,
while financials, technology and telecom stocks did poorly. The
Dow's decline was focused primarily on three of its members:
The Boeing Company
) and Cisco. CSCO fell 16.4%, BA was off 2.6%, and HPQ lost 2.4%.
And just before the close, another Dow member,
The Walt Disney Company
), missed its earnings forecast and was down 1.2%.
In corporate news,
) cut investment ratings on
Jabil Circuit, Inc.
), off 4.6%, and
Flextronics International Ltd.
), down 1.3%.
) earnings and revenues beat forecasts, and the stock rose
The euro fell to $1.366, down from $1.3787.
At the close, the Dow Jones Industrial Average fell 74 points to
11,283, the S&P 500 was off 5 points at 1,214, and the Nasdaq
lost 23 points at 2,556. The NYSE traded 952 million shares, and
the Nasdaq exchanged 689 million shares. On both exchanges
decliners led advancers by almost 2-to-1.
Crude oil for December delivery was unchanged at $87.81 a
Energy Select Sector SPDR
) closed at $63.88, up 69 cents. December gold rose $4 to $1,403.30
an ounce, while the
PHLX Gold/Silver Sector Index
) gained 2.43 points to 222.03.
What the Markets Are Saying
The AAII Sentiment numbers were released today and showed a huge
bullish jump of 9.3% to 57.6%. This is the highest bullish
sentiment number since January 2007. And with Wednesday's Investor
Intelligence (II) Advisors Sentiment Survey at the highest levels
since April of this year, and stocks at annual highs, it is time to
go on the defensive for the short term.
Even though the sentiment numbers and our own internal
indicators are very overbought, the charts of the major indices are
still strong. Yesterday's late rally pulled the intraday lows out
of the zones identified as immediate support. Nevertheless,
sentiment readings like those from AAII and II are clear warnings
that something more serious may be coming.
By now our readers should have
disposed of their non-performers
and taken big profits in stocks bought earlier in the year. And
both long-termers and intermediate buyers should hold cash as we
wait for a better buying opportunity. Traders may want to take a
position in aggressive bearish strategies, especially if we get a
rebound today. But don't enter anything at the market; wait for a
rally to a resistance line before jumping on board any shorts.
Our precious metals positions that we've covered throughout the
year are doing well and even advanced in the face of a stronger
dollar yesterday. But this too is a very volatile group, and if you
are thinking of buying at this level, wait for a pullback rather
than chasing these stocks to new highs.
"All things come to those who wait," and now is the time to
For one stock you won't have to wait much longer to buy, see the
Trade of the Day
Today's Trading Landscape
To see a list of the companies reporting earnings today,
To see what economic reports are due out this week,
If you have questions or comments for Sam Collins, please
e-mail him at