Wednesday, December 9, 2009

Stocks Higher, Though without Much Conviction

The Dollar risk trade continued to move US markets at midweek, as the major averaged struggled to gains in collusion with a weaker dollar. By far the biggest move of major stocks was by Apple (AAPL), which gained 7.93 (4.18%) on rumors of an early unveiling of its tablet computer, seen as a competitor to Amazon's Kindle and other so-called electronic book readers. Elsewhere, the mobil internet sector moved mostly higher in concert with Apple's big upswing.

Overall, however, the session was dull, with stocks falling early and only tacking on gains in the final hour. The S&P and NASDAQ spent almost the entire day in the red, while the Dow held a positive position for much of the day. In the final analysis, however, stocks moved higher only when the dollar index began to deteriorate after 2:00 pm, breaking off the general trend of the week.

Dow 10,337.05, +51.08 (0.50%)
NASDAQ 2,183.73, +10.74 (0.49%)
S&P 500 1,095.94, +4.00 (0.37%)
NYSE Composite 7,067.62, +11.36 (0.16%)

Advancing issues beat decliners, but by a very slight margin, 3374-3045. New highs retained their edge over new lows, 185-58, but the margin continued to exhibit weakness, declining for a fifth straight day. Volume was down again to the level seen on Monday, one of the lowest in months, adding some fuel to the bearish argument. The general movement of the markets has been sluggish since the triple tops made last week. Since then, indices have traded in a "no-man's land" with a slightly negative bias, all signs of a tired market that has made tops and should continued to vacillate lower. There needs to be a catalyst to move stocks forward, though none seems to exist. With the backdrop of a possible unwinding of the dollar carry trade, it's doubtful that any significant move higher will be made before the year's end. Stocks are fairly valued - some say overvalued - at the present. A 4-8% decline on fundamentals and profit-taking might actually be helpful heading into the new year.

NYSE Volume 4,684,984,500
NASDAQ Volume 1,837,168,375

Despite weakness in the dollar, commodities continued their downtrend, with crude oil down another $1.95, to $70.67. Oil fell for the fifth day in succession. Gold dropped as well, losing $22.40, to $1,121.00, off nearly $100 since last week. Silver dropped 63 cents, to $17.18, in a full retracement of its upsurge since October.

New unemployment claims will be in focus prior to the opening bell on Thursday, with expectations that fewer than 450,000 Americans signed on for unemployment benefits in the most recent week. If the recent trend holds true, it could make for a difficult day for stocks, as any good news seems to push the US dollar higher, and stocks lower.

One bit of economic news on the day that was slightly overlooked, yet helped stocks out of the red early, was wholesale inventories climbing 0.3% in November, breaking a string of declines, though that news could be discounted by the advent of the holiday season, which usually encourages higher inventories. Though the move was slight, investors viewed it as modestly positive.

There are significant crosswinds making trading difficult, a condition which has existed for more than a month. With so much uncertainty and conflicting signals, traders have become quite nimble, entering and exiting positions with grand alacrity.

No comments: