A pullback from recent highs began on the opening Thursday with selling continuing through the day. Tension over a bailout plan for Cypriot banks and a poor earnings report from key technology stock Oracle (NASDAQ:ORCL) were blamed for the decline.
Oracle reported disappointing fiscal Q3 earnings after the close on Wednesday, driving the stock down 9.7% on Thursday. The impact of this important cloud computing leader was felt throughout the technology sector, hitting the tech-heavy Nasdaq with a 0.97% loss. Cisco Systems (NASDAQ:CSCO), IBM (NYSE:IBM) and SAP (NYSE:SAP) all suffered sharp losses as well.
Economic reports were mixed. Home prices for January increased less than expected, jobless claims were up slightly from the prior week, and the Philly Fed’s March business activity index showed expansion.
At the close, the Dow Jones Industrial Average was off 90 points at 14,421, the S&P 500 fell 13 points to 1,546, and the Nasdaq was off 32 points at 3,223. The NYSE traded 651 million shares and the Nasdaq crossed 377 million. Decliners outpaced advancers by about 2-to-1 on both major exchanges.
The S&P 500, which commands the focus of most traders, has temporarily turned away from its resistance high of 1,563. But, as shown on this chart, there are numerous support points, any of which could hold a short-term decline.
The index has so far held at its 20-day moving average at 1,537. Just under it is the February high of 1,531, and below that the intermediate trendline at 1,520 and the 50-day moving average at 1,515.
Volume has not expanded on the decline, and the only group to take a licking on Thursday was technology — and that due to Oracle’s earnings miss. (See the March 18 Daily Market Outlook for S&P 500 Fibonacci support zones.)
Conclusion: Thus far, the Cyprus crisis has caused jitters, mainly because the Europeans haven’t yet tackled the problem of an economy the size of Vermont’s — not encouraging. However, there should be no real impact on U.S. markets other than a hesitation due to a short-term overbought market following one of the best starts in many years.
MACD has issued a short-term sell signal. Partially offsetting MACD was a new AAII report that showed the public’s bullish bent declined by 6.5%, while bearish sentiment rose by 1.3% — a good sign.
At worst, look for a pullback to the 1,515 to 1,531 band and have your list of stocks that you would like to own ready, along with buy under prices for each.
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.