Friday, July 24, 2009

Quiet End to Big Earnings Week

For the most part, investors cheered second quarter results from a wide swath of companies, sending the Dow Jones Industrials and other major indices to 2008 highs. The NASDAQ reached levels not seen since last October, while the S&P 500 careened back to its November 2008 levels.

Even though it was a down day for the NASDAQ - highly influenced by poor showings by Microsoft and Amazon after the close Thursday - that index ended a 12-day winning streak.

Dow 9,093.24, +23.95 (0.26%)
NASDAQ 1,965.96, -7.64 (0.39%)
S&P 500 979.26, +2.97 (0.30%)
NYSE Composite 6,337.46, +34.94 (0.55%)

For Friday, gainers led losers, 3818-2532. New highs cooled off after yesterday's exceptional showing, but still led new lows by a healthy, 2-1 margin, 164-82. Volume tapered off, with trading back to slow midsummer levels.

NYSE Volume 1,024,974,000
NASDAQ Volume 2,267,459,000

Commodities were again all over the map. September crude gained 89 cents, to $68.05, while gold fell $1.70 after a nice run-up, to end the week at $953.10. Silver was a winner, gaining another 11 cents, to $13.88, a magical level at which US silver coins are worth 10 times their face value. Both gold and silver once again seem poised to take off for new heights, though they've been in this territory before and rallies have been squelched by bouts of selling. with the US greenback under increasing pressure, however, this could be the moment for the precious metals to finally proclaim their value both as investments and hedges. Far and away, the precious metals have been the most stable investments this year, and since they are still in bull markets, there's little reason to believe they won't end the year shining.

The week was most impressive due to the relatively small number of companies posting poor second quarter results and next week may represent the last gasp of the long - now 5 month - rally. Within a rugged trading environment, wherein stocks and entire indices can turn on a dime, quick turnaround trades have been the best ally of most investors. The continued low volume indicates that the market is conducive to day-trading and that many players of all sizes are still sitting on the sidelines or have already been wiped out.

Next week is the highlight of the earnings season and also the end of another month. With the July employment report due out on August 7, there's ample reason to take profits and run, though the true high risk-takers may continue to hold, hoping that the incipient bear market rally erupts into a full-blown bull. The evidence for that happening is still a matter of great conjecture and clouded by a diversity of opinions and economic reports.

Best advice is to hang tight and hope for the best, though short term trading remains the obvious choice to avoid major losses. Wall Street has never resembled a casino more than at the current time. There are updrafts and downdrafts which could swing stocks in either direction. In such a context, apathy could be one's worst enemy and fear a grand ally.

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