The markets started yesterday on an optimistic note following
better-than-expected earnings from UPS (
) and a strong quarterly report from CSX (
). Both reported earnings on Wednesday after the markets had
Trading slowed following a strong first hour, and by noon stocks
were just slightly ahead. But the strong earnings for the two
transportation companies gave analysts something positive to write
about and confirm thoughts that the economy is turning
around. The transports are often cited as a major leading
indicator of economic growth.
The technology sector remained strong in anticipation of
better earnings from Google
). Google closed 1.07% higher and helped the Nasdaq lead the
other indices in percentage gain for the day, up 0.43%.
But all of the news was not good and some of the nasty news came
from the technology sector. Hewlett-Packard (
) fell 0.5% following reports that both German and Russian
officials are conducting a criminal investigation, and they allege
that the company has paid out "millions" in order to win contracts
Industrial Production in March rose by a much
smaller-than-expected 0.1%. Capacity utilization was in line
with expectations. The Empire State Manufacturing Survey hit a
five-month high, and the Philly Fed Survey for April beat consensus
estimates. But jobless claims and continuing claims were up
more than expected -- jobless claims to 484,000 and continuing
claims to 4.64 million.
At the close the Dow Jones Industrial Average was up 21 points
to 11,145, the S&P 500 gained a point, closing at 1,212, and
Nasdaq gained 11 points at 2,516. On the NYSE, volume rose to
1.2 billion shares with advances and declines even. Nasdaq's
volume rose to 704 million shares and advancers led decliners by
May Crude Oil was down 33 cents to settle at $85.51 on the
unexpected rise in new U.S. jobless claims. The Amex Energy
) closed at $60.32, down a cent. June Gold rose 70 cents to
$1,160.30 an ounce after trading lower for most of the
day. The PHLX Gold/Silver Index (
) was down $1.81 and closed at $173.06.
What the Markets Are Saying
Virtually all of our internal and sentiment indicators are back
to either "overbought" or "very overbought," and the market is back
to plodding after Wednesday's big triple-digit day. Yesterday
volume did increase just a bit after languishing at under 1 billion
) for almost a week. But yesterday's lack of enthusiasm, even
after some glowing earnings from some of the market's key players,
should make us pause and again ask ourselves just how much higher
this market can go without a significant correction.
Yesterday I referred to the seasonal pattern commonly known as
the "The Halloween Indicator"or the "
Sell in May and Go Away
"system. Essentially what this process relies upon is the
pattern that was studied in the American Economic Review and has
existed historically in 36 of 37 countries studied. Briefly
the conclusion is that stocks perform better in the winter months
(Halloween to May) than the summer months (May Day to
The study found that in the summer months returns have averaged
much less than in the winter months by such a large factor that
many investors literally cleaned out their portfolios in advance of
May. And no wonder. The study concluded that virtually
all of the long-term gains were made in the winter months. The
implication is that going to cash between May Day and Halloween
will have only a minor impact on long-term results but will
significantly reduce risk thus increasing overall returns by a
Like all timing strategies this one doesn't always
work. And in the most recent bear market the winter months
from November 2008 through April 2009 saw stocks fall through the
floor. But if followed over a long period, the missteps are
overcome and the strategy is shown to beat the "buy and hold"
method by a significant percentage.
Next week I'll cover some "triggers" that I recommend to tell us
precisely when to get in and get out. If you follow this
column you will no doubt recognize them as our internal
Stay alert -- it's a jungle of bulls vs. bears out there.
Thanks to Mark Hulbert of MarketWatch for some of this data.
Today's Trading Landscape
Earnings to be reported before the opening include: Bank of
America, First Horizon, Gannett, General Electric, Genuine Parts,
Knoll and Mattel.
Economic reports due: Housing Starts (the consensus
expects 0.605 M) and Consumer Sentiment (the consensus
3 Stocks Under $10 Set to Double
Each stock sells for less than $10 a share and is set to double in
the next 12 months.
Get their names, plus the four simple steps to
separating the bargains from the busts here