The second week of the new year began with mixed results with
telecommunications stocks down sharply while technology stocks
rescued the market from a general decline.
The Dow Jones Industrial Average fell 0.3%, led by a decline in
), which fell 1.5% after news of an agreement by the chemical giant
to acquire Danisco, a Danish maker of enzyme and specialty food
) rose 0.4%, ahead of Q4 earnings, which came in at 21 cents versus
an estimate of 19 cents, while sales were lighter than
Telecommunications stocks were down following confirmation by
) that it will offer the
) fell 2.1% and
) lost 1.8%.
In other corporate news,
agreed to acquire
) for stock at $46.48 per share.
Concerns over European debt again plagued stocks. Over the
weekend, it was reported that France and Germany pressured Portugal
to accept an Ireland-type bailout package from the International
Monetary Fund and the European Union (
The Wall Street Journal
Treasurys rose in response to worries about European borrowings.
The 10-year note fell 5 basis points to yield 3.28%. But the euro
rose to $1.2954, up from $1.2910 on Friday despite the
At yesterday's close, the Dow fell 37 points to 11,637, the
S&P 500 fell 2 points to 1,270, and the Nasdaq rose 5 points to
2,709. The NYSE traded 954 million shares with advancers and
decliners even. The Nasdaq crossed 491 million shares with
advancers ahead by 1.3-to-1.
Crude oil for delivery in February rose $1.22 to $89.25 a
barrel, and the
Energy Select Sector SPDR
) fell 27 cents to $68.01. February gold rose $5.20 to $1,374.10 an
PHLX Gold/Silver Sector Index
) rose 1.2 points to 212.5.
What the Markets Are Saying
With our internal and sentiment indicators so overbought, it is
natural to look for signs of deterioration in the major indices.
But thus far, the only potential negatives have appeared in the
Relative Strength Indices and momentum indicators of the Dow
industrials and the S&P 500. Both have headed down from their
extreme highs, and that could be an early warning of trouble ahead.
And while the stochastic has flashed a sell signal, such a sell
from the stochastic in a strong bull market does not carry a lot of
weight. The Nasdaq, which is still getting a push by the technology
sector, has a flat momentum indicator - neither a negative nor a
In mid-December, I noted the similarity between the end of 2009
and 2010 - that we could see a surge at the beginning of the year
very much like the two-week surge in January 2010. The strong
opening last week drove all of the indices to my January
objectives, and so now, with the indicators tending lower, rather
than remaining in the extreme bullish camp, I think it wise to step
back and exercise caution before entering into new equity
An exception could include those positions that are in basically
defensive groups like drugs, utilities, high-yielding blue chips,
etc. And long-term positions and those that are of an intermediate
term should be held. But short-term trades with goals of less than
a month should be protected with trailing stop-loss orders.
This period of uncertainty will most likely not last very long,
and could even be resolved by a rush to buy. But yesterday's puny
volume of less than 1 billion shares on the NYSE is not
encouraging. Let's step back and again let the market tell us its
future direction. The yellow flag is flying, and smart traders
shouldn't ignore it.
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