The Line the Market Needs to Hold Today

by Sam Collins | October 23, 2012 2:01 am

The Line the Market Needs to Hold Today

Until the last hour of trading Monday, indecision dominated and stocks sagged. Earnings reports from a number of sectors have been mixed, and buyers were hard to find following disappointing reports from many of the widely traded technology stocks. But late in the day, technology stocks led a late advance as Apple (NASDAQ:AAPL[1]) rose 4%, Cirrus Logic (NASDAQ:CRUS[2]) rose 3.8%, and Netflix (NASDSQ:NFLX[3]) gained 4.5%.

At Monday’s close, the Dow Jones Industrial Average was up 2 points to 13,346, the S&P 500 rose a point to 1,434, and the Nasdaq gained 11 points at 3,017. The NYSE traded 634 million shares and the Nasdaq crossed 379 million. Advancers and decliners were close to even on both markets.

10 23 12 dow 300x201 The Line the Market Needs to Hold Today
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chart key 300x84 The Line the Market Needs to Hold Today

A last-hour reversal sent prices back to breakeven on the Dow Monday. The reversal triggered a buy signal from our internal indicator, the Collins-Bollinger Reversal (CBR), as the Dow almost closed above its 50-day moving average. The stochastic and other internal indicators are still on a mild sell signal. But with bands of support, the first at 13,100, it doesn’t seem likely that a sharp sell-off is about to occur.

10 23 12 vix 300x201 The Line the Market Needs to Hold Today
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The CBOE Volatility Index (VIX) rebounded, a result of Friday’s sell-off, and broke through its 50-day moving average (blue line). But it failed to follow through and turned down from the 200-day.

This failure to surmount the important 200-day implies that the recent selling is most likely the result of simple profit-taking along with the gyrations normally associated with options expiration on Friday. However, if the VIX penetrates the red index line, we will probably be in for a series of tests of support for the various indices.

Conclusion: Despite lower-than-expected earnings in the technology sector, the election, an overhanging danger of a fiscal cliff, along with other worries too numerous to name, the stock market has held to its uptrend lines. But momentum has markedly slowed, and with that the possibility of a further pullback increases.

If the Dow cannot hold above its 50-day moving average on Tuesday, then the next support line at 13,100 will likely be tested. As noted on Monday[4], this is not a time to buy or sell, but rather to wait for Mr. Market to tell us of his next direction.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here[5].

For a list of this week’s economic reports due out, click here[6].

Endnotes:
  1. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  2. CRUS: http://studio-5.financialcontent.com/investplace/quote?Symbol=CRUS
  3. NFLX: http://studio-5.financialcontent.com/investplace/quote?Symbol=NFLX
  4. As noted on Monday: http://investorplace.com/2012/10/daily-stock-market-news-sell-off-changes-markets-technical-picture/
  5. click here: http://online.wsj.com/mdc/public/page/markets_calendar.html?mod=topnav_2_3024
  6. click here: http://www.briefing.com/Investor/Public/Calendars/EconomicCalendar.htm

Source URL: http://investorplace.com/2012/10/daily-stock-market-news-the-line-the-market-needs-to-hold-today/
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