Stocks started with a gain of 65 Dow points yesterday in the
first minutes of trading. But a midday sell-off took back the
initial gains plus 70 more points in a rush for the exits. However,
after three and a half hours of plodding, the deficit was finally
overcome, leaving the Dow slightly in the black. So ended a
volatile and sloppy day of trading in which stocks were again
jerked around by news.
The news of the day was primarily economic. The May ADP
Employment Change report showed that the private sector payrolls
increased by 55,000, and that was 15,000 less than expected.
Initial claims for the week ending May 29 totaled 453,000, slightly
over expectations. Continuing jobless claims climbed to 4.67
million versus an expected 4.61 million. ISM Services Index for May
was 55.4, which was in line with the 55.6 expected. Finally,
factory orders for April increased by 1.2%, but 1.7% was
In addition to the basic economic reports, those from retailers
also reflected the economy's uneven recovery.
Costco Wholesale Corporation
) fell after reporting that same-store sales rose 9% and net sales
) said that its same-store sales rose 1.3%, which was slightly
higher than estimates.
Technology stocks led the
) to a broad gain.
) rose 2.48%,
) gained 1.51%, and
Cisco Systems, Inc.
) was up 1.58%.
The dollar gained versus the euro. The 10-year Treasury note
fell to a yield of 3.381%.
At the close, the
Dow Jones Industrial Average
) gained 6 points to 10,225, the
) rose 4 points to 1,103, and the Nasdaq rose 22 points to
The NYSE traded 1.2 billion shares with advancers leading
decliners by more than1.5-to-1. The Nasdaq crossed 620 million
shares, and advancers there were ahead by almost 2-to-1.
July crude oil rose $1.75 to settle at $74.61 a barrel on rumors
that the government was ready to ban all new offshore drilling,
including shallow water exploration. But the rumor was later
Energy Select Sector SPDR
) rose 71 cents to $53.43.
Gold for August delivery fell $12.60 to $1,210 an ounce, and the
PHLX Gold/Silver Sector Index
) closed at 173.41, down 3.82 points.
What the Markets Are Saying
Yesterday's market action was a non-issue with regard to the
technical condition of the market, except for the performance of
Nasdaq. The index, which is heavily weighted with technology
stocks, broke above its 200-day moving average early last week and,
unlike its brethren, has moved ahead with gusto.
Yesterday, the Nasdaq rose again, this time penetrating its
20-day moving average and pushing toward its next objective, the
top of the resistance zone at 2,270 to 2,320. Perhaps
the Nasdaq is telling us that the broad market will follow. But one
index can't drag everything higher, and upside volume in the
big-cap stocks, other than tech, must make a showing if the 200-day
moving averages for the Dow Industrials and the S&P 500 are to
This is Friday, which is the day that we usually discuss the
The first of the sentiment indicators, the AAII Sentiment
Survey, showed that AAII members were less bullish, falling from
41.3% on May 20 to 29.82% on May 27. But this week the bullish
reading jumped to 37.09% while the bearish reading fell from 50.88%
the week before to 40.85%. The numbers are not extreme, but the
direction of the change is disturbing since the market usually
moves in the opposite direction of the members'
Another sentiment indicator, the Advisors Sentiment from
Investors Intelligence, shows a similar mild increase in bullish
sentiment for the second consecutive week, and that is not
As for the
CBOE Volatility Index
), it fell to under 30 yesterday after a week of wild gyrations
that hit a new high for the year at over 45. Only four days of
trading this week may have had something to do with the fall in
volatility, but the number is still too high, so it may at best be
discounted as neutral.
Our internal indicators,
Moving Average Convergence/Divergence (
, stochastic (slow and fast), and momentum are consistently
oversold. And MACD issued a short-term buy signal on
Upside volume continues to be abnormally low, the sentiment
indicators are negative, but the internal indicators are turning
bullish. The chances for a short-term rally are improving, and the
big-cap indices may even close above the major resistance at their
respective 200-day moving averages.
If they are successful, then the trading target for the Dow is
10,550, for the S&P 500 it is 1,150, and the Nasdaq's target is
2,400. However, if the big caps falter and close below the
February/May lows, then we will almost certainly ramp down rapidly
with a initial target of S&P 1,000.
Today's Trading Landscape
Earnings to be reported before the opening
American Woodmark, Blyth Industries and Met-Pro Corp.
Economic reports due:
Employment Situation (the consensus expects a 9.8% unemployment
rate), and Treasury STRIPS.
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