Following the new 52-week and 2009 highs set by the Dow Jones Industrial Average on Monday, investors were put into a quandary on Tuesday, one which will likely be resolved at some time this week. The question on the minds of most traders is whether or not the rally has sufficient energy to first, sustain current levels, and, secondly, to move to even higher ground in the immediate future.
In search of an answer to those questions, technical analysis should provide the most propitious resolution. From two to four separate indices should provide either confirmation or counterweight to the Dow's new closing highs. The most important of these is probably the S&P 500, which, on Monday, closed at less than 5 points off its own closing high of 1097.91, which was the level recorded on October 19. It may be splitting hairs, but a close above that is a vital element, necessary to move the overall indices higher.
Next on the list is the Dow Jones Transportation Average (^DJT) which made its own closing high (4045.11) on October 20, but has since backed well off, finishing today more than 100 points lower than that level (3916.91). A certain paradox comes into play with the relation to the Industrials, as their prior peak was on October 19 (1092.19) and was confirmed by the Transports the following day.
So, the Industrials have moved ahead, alone, and seek a partner for confirmation. One explanation is that the Dow moved in solitary fashion as a brief flight to quality and safety, and the fundamentals for the other parts of the market are not strong enough to keep pace. The Industrials are just 30 stocks, most of which are paying high quality dividends - taken together yielding better than 3.5% - whereas the S&P 500 is much broader (500 stocks). The Transportation index is comprised of just 20 stocks, a good number of them airlines, which have suffered badly through the economic downturn and have yet to recover. Thus, the confirmation may be a bit of a stretch at this juncture.
As a proxy for the airlines, consider Priceline.com (PCLN), the travel discounter, which today announced 3rd quarter operating results and blew away estimates, sending shares up more than 30 points (17%) on the news. This company might be more useful in determining the overall market strength of the Transports, being a much more efficient model than the airlines themselves. Also adding to the no-confirmation-needed argument is FedEx (FDX), which projected today that their busiest day this year - December 14 - would also be their busiest day EVER!
While FedEx is a component of the Dow Jones Transportation Index, Priceline.com is not, though maybe it's time for the Transportation index to "get up to speed" with the evolution of technology in transportation. Given that argument, the Transports would have blown through their previous highs and provided confirmation to the lonely Industrials.
Further down the pecking order are the NASDAQ and NYSE Composite, the two broadest measures of the market, both of which reached closing highs on October 19 of 2176.32 and 7222.21, respectively, and have yet to return to those levels, though they are not far off of them.
All of this sets up a very interesting scenario for Veteran's Day, in which the stock markets are open, but all banks and bond markets are closed, so, if one thought stocks were "going on alone" this week, without the aid of economic or corporate reporting, Wednesday will be a real loner. Maybe some of those bond-trading titans will lend a hand over at the NYSE.
On the day, only the Dow finished in the green, though the losses suffered by the other indices were marginal.
Dow 10,246.97, +20.03 (0.20%)
NASDAQ 2,151.08, -2.98 (0.14%)
S&P 500 1,093.01, -0.07 (0.01%)
NYSE Composite 7,126.42, -8.91 (0.12%)
Declining issues finished ahead of advancers, 3594-2180. New highs finished ahead of new lows, 315-85. Volume was low again, a signature of this week's trading.
NYSE Volume 4,508,971,500
NASDAQ Volume 2,010,213,625
Crude oil lost 38 cents, to $79.05. Gold gained $1.10, to $1,102.50, but silver continued to lag, down 26 cents, at $17.23.
Tuesday, November 10, 2009
Monday, November 9, 2009
Within News Void, Stocks Gallop Ahead
Opening the trading week with benign news from the G-20, which - through US mouthpiece Tim Geithner - stressed on Sunday that stimulus should remain in place, investors were encouraged enough to ignore the dire unemployment readings from Friday past, boosting equities right at the open and increasing the gains in a slow, steady grind upward throughout the session.
The Dow posted one of its best showings since the bottom in March, closing at its high for the year. Aided by the weakened US dollar, the other indices sported large advances, with the S&P approaching its key top at 1100, which has been hit but never breached this year. The telling part of this advance will come tomorrow, to see if the S&P can close above its previous high. With the Dow providing guidance, it appears to be a solid bet that stocks will continue to advance into the holiday shopping season. There are no meaningful earnings reports or economic data this week, so investors are on their own, so to speak.
Dow 10,226.94, +203.52 (2.03%)
NASDAQ 2,154.06, +41.62 (1.97%)
S&P 500 1,093.07, +23.77 (2.22%)
NYSE Composite 7,135.33, +177.04 (2.54%
The gains were broad-based, with 4465 advancing issues to 1338 decliners. New highs trumped new lows, 340-62, the largest daily margin in weeks. Volume was dismally low, however, as has been the case with much of the advance, even through the summer and fall. While all of Wall Street is abuzz with word of the vast sums of money sitting on the sideline, there is no indication that this money is coming into stocks as yet.
NYSE Volume 4,669,590,000
NASDAQ Volume 2,034,704,500
Commodities followed the inverse of the dollar, with oil ahead by $2.00, to $79.43, gold advancing $5.90, to $1,101.60 and silver gaining 9 cents to $17.46. Look for silver to break out soon, as it has not performed as well as gold recently. There were widespread rumors that the Indian government paid for their recent gold purchase from the IMF with silver, though that story has been widely discredited.
Investors should be buying in here on the rise, as there seems to be no impediment to stock gains. There will, however, be a pullback at some point, though the conditions for such a move may be weeks away and shallow, as has been the case throughout the 8-month-old rally.
The Dow posted one of its best showings since the bottom in March, closing at its high for the year. Aided by the weakened US dollar, the other indices sported large advances, with the S&P approaching its key top at 1100, which has been hit but never breached this year. The telling part of this advance will come tomorrow, to see if the S&P can close above its previous high. With the Dow providing guidance, it appears to be a solid bet that stocks will continue to advance into the holiday shopping season. There are no meaningful earnings reports or economic data this week, so investors are on their own, so to speak.
Dow 10,226.94, +203.52 (2.03%)
NASDAQ 2,154.06, +41.62 (1.97%)
S&P 500 1,093.07, +23.77 (2.22%)
NYSE Composite 7,135.33, +177.04 (2.54%
The gains were broad-based, with 4465 advancing issues to 1338 decliners. New highs trumped new lows, 340-62, the largest daily margin in weeks. Volume was dismally low, however, as has been the case with much of the advance, even through the summer and fall. While all of Wall Street is abuzz with word of the vast sums of money sitting on the sideline, there is no indication that this money is coming into stocks as yet.
NYSE Volume 4,669,590,000
NASDAQ Volume 2,034,704,500
Commodities followed the inverse of the dollar, with oil ahead by $2.00, to $79.43, gold advancing $5.90, to $1,101.60 and silver gaining 9 cents to $17.46. Look for silver to break out soon, as it has not performed as well as gold recently. There were widespread rumors that the Indian government paid for their recent gold purchase from the IMF with silver, though that story has been widely discredited.
Investors should be buying in here on the rise, as there seems to be no impediment to stock gains. There will, however, be a pullback at some point, though the conditions for such a move may be weeks away and shallow, as has been the case throughout the 8-month-old rally.
Friday, November 6, 2009
Poor Jobs Data Fails to Induce Selling
Prior to the opening bell, the highly-anticipated Non-farm Payroll announcement from the Labor Dept. initially sent futures into near free-fall, but, after a modest decline in the first few minutes of trading, stocks stabilized and spent the rest of the day hugging the flat line.
October saw 190,000 jobs lost in the US and the "official" unemployment rate crank up to 10.2%, the highest since 1982. That the jobless rate was so high just 27 years ago must have served as a salve of sorts to investors, because the markets took it in stride. There is also the growing understanding that many of the US firms listed on the stock exchanges do not rely on the United States as their primary markets, one of the myriad hidden factors of globalization. Thus, US employment is not as large a factor in many businesses, plus, due to the largesse of the federal government, many people who are not employed have fairly sizable disposable incomes, allowing those same US markets to function as though full employment was in force.
Of course, the federal punchbowl of benefits is not any way to grow an economy, but equity investors seem intent on pushing prices higher, so long as the Federal Reserve keeps rates at essentially zero and Uncle Sam continues to dole out the greenbacks. Naturally, the dollar continues to decline in value, a condition not lost on the macro-economic crowd.
Nevertheless, Friday was not the day to be selling stocks as the major indices eked out marginal gains. Monday, however, may be another story.
Dow 10,023.42, +17.46 (0.17%)
NASDAQ 2,112.44, +7.12 (0.34%)
S&P 500 1,069.30, +2.67 (0.25%)
NYSE Composite 6,958.29, +8.15 (0.12%)
As one might expect, winners and losers were nearly evenly split, with declining issues taking a small advantage, 3203-3177. New highs, though, soared well ahead of new lows, 209-61, widening the margin for the third consecutive session.
Volume was negligible, well below normal levels, though Fridays are becoming something of an outlier, with trading sluggish at the end of the week.
NYSE Volume 4,999,170,500
NASDAQ Volume 1,845,147,875
Commodities finished mixed, with oil down $2.19, at $77.43, gold ahead $6.70, to $1,096.00, and silver lower by 4 cents, to $17.38. After the enormous move by gold over the past three weeks - a 10% gain - it appears that the yellow metal has found its own market, diverging even from its fellow precious metals. Platinum was lower on the day, and copper was flat. Gold has gone its own way and cannot be counted on as anything but a separate asset class, and possibly a proxy against all fiat currencies.
The cross-currents in the markets lately have been extreme, adding to volatility in some cases, but also prviding significant headwinds to any upward movement in stocks. The indices are settled below recent highs, and it does not appear that there's enough of a catalyst anywhere - outside of the easy carry trade on the back of the declining dollar - to propel equities through their recent highs. Within days the focus will be on the holiday shopping season, and, while many Americans may not be able to luxuriate their friends and families with expensive gifts this season, well-heeled foreigners certainly can take advantage of the prices of goods denominated in US dollars, especially Europeans and Chinese shoppers. International centers such as New York, Los Angeles and Miami may very well see increased traffic from outsiders, while Americans do their holiday purchasing at the various discounters, striking something of a balance.
With 3rd quarter earnings season now nearly complete, the next few weeks may indeed be a true test of the fortitude of US markets and equities. One thing's for sure: it's not going to be dull.
October saw 190,000 jobs lost in the US and the "official" unemployment rate crank up to 10.2%, the highest since 1982. That the jobless rate was so high just 27 years ago must have served as a salve of sorts to investors, because the markets took it in stride. There is also the growing understanding that many of the US firms listed on the stock exchanges do not rely on the United States as their primary markets, one of the myriad hidden factors of globalization. Thus, US employment is not as large a factor in many businesses, plus, due to the largesse of the federal government, many people who are not employed have fairly sizable disposable incomes, allowing those same US markets to function as though full employment was in force.
Of course, the federal punchbowl of benefits is not any way to grow an economy, but equity investors seem intent on pushing prices higher, so long as the Federal Reserve keeps rates at essentially zero and Uncle Sam continues to dole out the greenbacks. Naturally, the dollar continues to decline in value, a condition not lost on the macro-economic crowd.
Nevertheless, Friday was not the day to be selling stocks as the major indices eked out marginal gains. Monday, however, may be another story.
Dow 10,023.42, +17.46 (0.17%)
NASDAQ 2,112.44, +7.12 (0.34%)
S&P 500 1,069.30, +2.67 (0.25%)
NYSE Composite 6,958.29, +8.15 (0.12%)
As one might expect, winners and losers were nearly evenly split, with declining issues taking a small advantage, 3203-3177. New highs, though, soared well ahead of new lows, 209-61, widening the margin for the third consecutive session.
Volume was negligible, well below normal levels, though Fridays are becoming something of an outlier, with trading sluggish at the end of the week.
NYSE Volume 4,999,170,500
NASDAQ Volume 1,845,147,875
Commodities finished mixed, with oil down $2.19, at $77.43, gold ahead $6.70, to $1,096.00, and silver lower by 4 cents, to $17.38. After the enormous move by gold over the past three weeks - a 10% gain - it appears that the yellow metal has found its own market, diverging even from its fellow precious metals. Platinum was lower on the day, and copper was flat. Gold has gone its own way and cannot be counted on as anything but a separate asset class, and possibly a proxy against all fiat currencies.
The cross-currents in the markets lately have been extreme, adding to volatility in some cases, but also prviding significant headwinds to any upward movement in stocks. The indices are settled below recent highs, and it does not appear that there's enough of a catalyst anywhere - outside of the easy carry trade on the back of the declining dollar - to propel equities through their recent highs. Within days the focus will be on the holiday shopping season, and, while many Americans may not be able to luxuriate their friends and families with expensive gifts this season, well-heeled foreigners certainly can take advantage of the prices of goods denominated in US dollars, especially Europeans and Chinese shoppers. International centers such as New York, Los Angeles and Miami may very well see increased traffic from outsiders, while Americans do their holiday purchasing at the various discounters, striking something of a balance.
With 3rd quarter earnings season now nearly complete, the next few weeks may indeed be a true test of the fortitude of US markets and equities. One thing's for sure: it's not going to be dull.
Thursday, November 5, 2009
With All Eyes on Jobs, Stocks Power Higher
The markets often find ways to correct their errant ways - like yesterday's late-day, computer-trade-driven sell-off - with immediate and powerful results. Such was the case on Thursday as stocks gained right out of the gate, fueled by better-than-expected results from Cisco (CSCO) and lower-than-expected initial jobless claims. The stunning number, however, was October productivity, which chimed in at +9.5%, well ahead of expectations of 6.5% and the strongest indication to date that companies are on the verge of hiring workers.
Productivity gains of such magnitude suggest that employers are getting every last ounce of effort from trimmed-down staffs and it may be time to begin expanding the labor force in a variety of industries. Tomorrow's Non-farm payroll report for October will fill in the last piece of the puzzle, though by all indications, investors feel comfortable being in the market prior to the 8:30 am release of the data, sending the Dow back up over 10,000 and the S&P past a key 1065 level.
Dow 10,005.96, +203.82 (2.08%)
NASDAQ 2,105.32, +49.80 (2.42%)
S&P 500 1,066.63, +20.13 (1.92%)
NYSE Composite 6,950.14, +119.71 (1.75%)
Once again, simple indicators told the story of a broad-based rally with considerable strength behind the headline numbers. Advancing issues pounded decliners, 5095-1389, and new highs soared ahead of new lows, 161-57.
Volume was less than usual, a somewhat sobering fact, though tracking the markets via volume has not been a particularly solid indicator during this rally. Lower-than-usual has been the case so often that lower volume figures have actually become normalized.
NYSE Volume 5,480,293,000
NASDAQ Volume 2,121,401,500
Commodities were muted as the dollar index remained relatively unchanged throughout the day. That stocks can move forward with such aplomb without the aid of a weaker dollar speaks volumes about the prospects for a robust recovery. On the day, oil lost ground, dropping 78 cents, to $79.62 at the close. Gold added $2.20, to $1,089.50, while silver dipped a penny, to $17.40.
A number of retailers released same-store sales figures for October, with results all over the map due to the recession, odd comparisons to last year because the damage to the economy was just beginning, and various discounting and inventory issues which varied by retailer. With the holiday shopping season just weeks away, investors will be turning their attention to retailers, with an eye toward an improvement over last year's near-disaster.
Tomorrow's jobs data should be market-moving, especially the unemployment figure which continues to hover close to 10%. That is the number many fear, that if the government announces unemployment at that level, it will trigger an all-out selling spree in equities as investors flee from speculative issues back into fixed assets. A reading of 9.8% might be just good enough to keep confidence high.
No matter the case, it seems that there is no ceiling on stocks. The turn-back over the past few weeks has been all but recovered, and the overall drop was another smallish 5-6% decline, instead of the "correction" of 10-15% that many of the so-called "experts" have been calling for since May. There's almost no reason to believe that stocks will pull back 10% any time soon, though tomorrow's jobs data could change that arithmetic.
For now, however, the recovery appears on solid ground. The final key is jobs and when they will come back.
Productivity gains of such magnitude suggest that employers are getting every last ounce of effort from trimmed-down staffs and it may be time to begin expanding the labor force in a variety of industries. Tomorrow's Non-farm payroll report for October will fill in the last piece of the puzzle, though by all indications, investors feel comfortable being in the market prior to the 8:30 am release of the data, sending the Dow back up over 10,000 and the S&P past a key 1065 level.
Dow 10,005.96, +203.82 (2.08%)
NASDAQ 2,105.32, +49.80 (2.42%)
S&P 500 1,066.63, +20.13 (1.92%)
NYSE Composite 6,950.14, +119.71 (1.75%)
Once again, simple indicators told the story of a broad-based rally with considerable strength behind the headline numbers. Advancing issues pounded decliners, 5095-1389, and new highs soared ahead of new lows, 161-57.
Volume was less than usual, a somewhat sobering fact, though tracking the markets via volume has not been a particularly solid indicator during this rally. Lower-than-usual has been the case so often that lower volume figures have actually become normalized.
NYSE Volume 5,480,293,000
NASDAQ Volume 2,121,401,500
Commodities were muted as the dollar index remained relatively unchanged throughout the day. That stocks can move forward with such aplomb without the aid of a weaker dollar speaks volumes about the prospects for a robust recovery. On the day, oil lost ground, dropping 78 cents, to $79.62 at the close. Gold added $2.20, to $1,089.50, while silver dipped a penny, to $17.40.
A number of retailers released same-store sales figures for October, with results all over the map due to the recession, odd comparisons to last year because the damage to the economy was just beginning, and various discounting and inventory issues which varied by retailer. With the holiday shopping season just weeks away, investors will be turning their attention to retailers, with an eye toward an improvement over last year's near-disaster.
Tomorrow's jobs data should be market-moving, especially the unemployment figure which continues to hover close to 10%. That is the number many fear, that if the government announces unemployment at that level, it will trigger an all-out selling spree in equities as investors flee from speculative issues back into fixed assets. A reading of 9.8% might be just good enough to keep confidence high.
No matter the case, it seems that there is no ceiling on stocks. The turn-back over the past few weeks has been all but recovered, and the overall drop was another smallish 5-6% decline, instead of the "correction" of 10-15% that many of the so-called "experts" have been calling for since May. There's almost no reason to believe that stocks will pull back 10% any time soon, though tomorrow's jobs data could change that arithmetic.
For now, however, the recovery appears on solid ground. The final key is jobs and when they will come back.
Wednesday, November 4, 2009
Fed Watchers Get what They Want; Disappoint Late
Stocks were up solidly early in the day, an exceptional note of optimism ahead of the 2:15 pm Fed rate policy decision. The Dow gained as much as 140 points in the early going, with the other indices tagging along with similar percentage gains of roughly 1-1.35%.
When the Fed finally released its statement, Bulls got exactly what they wanted, little to no change in the overall verbiage, with no change in rates. After the normal, brief zig-zagging, the indices stabilized roughly where they were before the announcement, though began to descend slightly between 2:45 and 3:15. With just 45 minutes left in the session, however, a vicious sell-off was undertaken, trimming about 100 points off the Dow's gains and sending the NASDAQ into the red.
As such, stocks finished mixed again, though this time the only index below the unchanged line was the unfortunate NASDAQ, which is a bit confounding, since tech and speculative stocks in the NASDAQ have been responsible for much of the rally over the past 8 months. Monday will mark the end of the 8th month of the rally which began in earnest on March 9, 2009.
Dow 9,802.14, +30.23 (0.31%)
NASDAQ 2,055.52, -1.80 (0.09%)
S&P 500 1,046.50, +1.09 (0.10%)
NYSE Composite 6,830.43, +17.73 (0.26%)
Advancing issues were barely beaten by decliners, 3238-3236, with the emphasis on the downside clearly in NASDAQ stocks. However, the subtle change in the high-low indicator augurs better days ahead and a possible end to the market funk of the past two weeks. New highs outpaced new lows, 142-74, the best showing in a week and easily the best so far this month.
Volume was low, another positive, especially considering the late-day sell-off, which, many suspect was nothing more than shrewd tape-painting by insiders seeking an edge for Thursday.
NYSE Volume 6,510,982,000
NASDAQ Volume 2,134,476,250
Commodities were all priced higher as the dollar was weaker throughout the day. Oil was up 80 cents, to $80.40. Gold reached new highs, closing up $2.10, at $1,087.00, though it traded as high as $1095.00. Silver added 22 cents to $17.40.
Prior to the market open, more economic data was released. the ADP Employment Report showed a loss of 203,000 private sector jobs in October, an improvement over September's revised reading of -227,000, but still on the high side. This also bodes well for the October Non-farm payroll report due out prior to Friday's opening bell. First, the ADP report from last month was -254,000 unrevised, and has been revised lower by 27,000. The September non-farm payroll figure was 263,000, just a bit higher than the ADP reading. If the government revises lower, as ADP did, and remains somewhat in line with forecasts, we could see the first reading below 200,000 in over a year on Friday, which would be a real boost to the market.
Some indication of improvement in the jobs picture came on Monday, in the ISM manufacturing index, which showed improvement in the employment outlook segment. The expectation is for a loss of 175-220,000 jobs in the month, though anything below 210,000 would be positive.
Retail sales figures for October will be released prior to the open and they are expected to be solid.
Cisco (CSCO) reported excellent figures for their fiscal 1st quarter after the bell - .36 per share on expectations of .31, and higher revenue than expected - with the stock moving 3-4% higher after hours, hovering around 24.00 per share.
When the Fed finally released its statement, Bulls got exactly what they wanted, little to no change in the overall verbiage, with no change in rates. After the normal, brief zig-zagging, the indices stabilized roughly where they were before the announcement, though began to descend slightly between 2:45 and 3:15. With just 45 minutes left in the session, however, a vicious sell-off was undertaken, trimming about 100 points off the Dow's gains and sending the NASDAQ into the red.
As such, stocks finished mixed again, though this time the only index below the unchanged line was the unfortunate NASDAQ, which is a bit confounding, since tech and speculative stocks in the NASDAQ have been responsible for much of the rally over the past 8 months. Monday will mark the end of the 8th month of the rally which began in earnest on March 9, 2009.
Dow 9,802.14, +30.23 (0.31%)
NASDAQ 2,055.52, -1.80 (0.09%)
S&P 500 1,046.50, +1.09 (0.10%)
NYSE Composite 6,830.43, +17.73 (0.26%)
Advancing issues were barely beaten by decliners, 3238-3236, with the emphasis on the downside clearly in NASDAQ stocks. However, the subtle change in the high-low indicator augurs better days ahead and a possible end to the market funk of the past two weeks. New highs outpaced new lows, 142-74, the best showing in a week and easily the best so far this month.
Volume was low, another positive, especially considering the late-day sell-off, which, many suspect was nothing more than shrewd tape-painting by insiders seeking an edge for Thursday.
NYSE Volume 6,510,982,000
NASDAQ Volume 2,134,476,250
Commodities were all priced higher as the dollar was weaker throughout the day. Oil was up 80 cents, to $80.40. Gold reached new highs, closing up $2.10, at $1,087.00, though it traded as high as $1095.00. Silver added 22 cents to $17.40.
Prior to the market open, more economic data was released. the ADP Employment Report showed a loss of 203,000 private sector jobs in October, an improvement over September's revised reading of -227,000, but still on the high side. This also bodes well for the October Non-farm payroll report due out prior to Friday's opening bell. First, the ADP report from last month was -254,000 unrevised, and has been revised lower by 27,000. The September non-farm payroll figure was 263,000, just a bit higher than the ADP reading. If the government revises lower, as ADP did, and remains somewhat in line with forecasts, we could see the first reading below 200,000 in over a year on Friday, which would be a real boost to the market.
Some indication of improvement in the jobs picture came on Monday, in the ISM manufacturing index, which showed improvement in the employment outlook segment. The expectation is for a loss of 175-220,000 jobs in the month, though anything below 210,000 would be positive.
Retail sales figures for October will be released prior to the open and they are expected to be solid.
Cisco (CSCO) reported excellent figures for their fiscal 1st quarter after the bell - .36 per share on expectations of .31, and higher revenue than expected - with the stock moving 3-4% higher after hours, hovering around 24.00 per share.
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