Blue chips led a mixed advance on Friday with the Dow Jones Industrial Average and S&P 500 gaining, but the Nasdaq falling due to continued pressure on the technology sector.
Stocks opened higher as a result of a better-than-expected November jobs report that showed 146,000 new jobs. The unemployment rate fell to 7.7% from 7.9% when it was expected to remain unchanged. But the market flattened following the December Michigan Sentiment Index, which indicated that consumers were far less positive about the economy.
At Friday’s close, the Dow had gained 81 points at 13,155, the S&P 500 rose 4 points to 1,418, and the Nasdaq fell 11 points at 2,978. The NYSE traded 605 million shares and the Nasdaq crossed 349 million. On the Big Board, advancers led decliners by 1.2-to-1, but on the Nasdaq, decliners were ahead by 1.1-to-1.
There has been much discussion about the bearish death cross on the chart of Apple (NASDAQ:AAPL), but hardly any mention of the same pattern developing on the Nasdaq.
Friday’s failure to put a plus day on the board makes it very difficult to stop the descending 50-day moving average from penetrating the 200-day moving average. The MACD indicator’s fast line (red) has turned down, and if it flashes a sell signal, then the next real support is at the intermediate support line at about 2,850 with shallow support at the 20-day moving average (green line).
The Dow’s chart is much stronger than the Nasdaq’s. The index scored a nice gain on Friday, placing it above the 50-day moving average for the first time since mid-October. Along with the S&P 500, the two indices give a bullish bias to the market.
Conclusion: Despite the overwhelming lack of clarity from the politicians, the stock market has reacted well in the face of uncertainty, and that alone is bullish. If the fiscal cliff problems can be solved before Christmas, the market could have a solid Santa Claus rally.
Since the outcome is far from being decided, it is best for most investors to stay on the sidelines, with two exceptions: First, some quality stocks in the Nasdaq are falling into attractive buy zones (I’ll cover some of those next week); and then there are the traders who, if nimble, can take advantage of the high daily volatility that is the product of headline-based activity.
Attention short sellers: Many companies are paying extra and/or extraordinary dividends before a tax hike takes effect in 2013. If you are short stock on the ex-dividend date, you are on the hook for that dividend since you have borrowed the stock from a lender who deserves the dividend.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.