After an opening dip blamed on billionaire investor Warren Buffett’s remark that the “economy has fallen off a cliff,” stocks rallied and an hour later were at the high of the day, up 90 points. But renewed selling in the technology sector that persisted from mid-morning to the close resulted in another down day for stocks.
A good showing by the battered financials had little overall market impact, but some of “The Oracle of Omaha’s” favorites — Wells Fargo (WFC), up 3.76%, and General Electric (GE), up 5% — responded to his singling them out as good values.
But neither the proposed purchase of Schering-Plough (SGP) by Merck (MRK) or the progressing merger talks between Genentech (DNA) and Roche impressed investors enough to make them part with their cash.
Energy stocks advanced along with the price of crude oil. Dow (DJI) stocks Exxon Mobil (XOM) and Chevron (CVX) both had modest increases and the group was up by about half a percent.
At the close, the Dow Jones Industrial Average (DJI) was down 80 points to 6,547. The S&P 500 (SPX) fell seven points to 676, and the Nasdaq (NASD) was down 25 points, closing at 1,269.
The New York Stock Exchange traded 1.5 billion shares, with decliners ahead of advancers by almost 3-to-1. The Nasdaq traded 770 million shares, with decliners ahead by about 2.5-to-1.
The April crude oil contract closed $1.55 higher, and the Amex Energy SPDR (XLE) gained 7 cents to $38.86.
The April gold contract fell $24.70, ending the day at $918 an ounce, and the PHLX Gold/Silver Index (XAU) lost $4.06 at $115.50.
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What the Markets Are Saying
Technicians continue to bemoan that, despite the oversold internal indicators and sentiment numbers that show record levels of fear, the market continues to sell off. Normally at such oversold levels of the key indicators we should expect a rally — but not lately.
A rally may be overdue but, so far, all we seem to get is one or two days up and then down again. The mood is described by Standard & Poor’s market strategist who on Friday said, “We think the market is in desperate need of a washout to at least turn the tide for awhile back to the upside. We have been looking for a counter trend rally, but all we are seeing are one-day wonders.”
So where is the bottom — or bottoms?
Last week, I did a study for ChangeWave Research of possible support areas and here is the result: There are two Fibonacci retracement numbers that are drawn from the 1974 low to the October 2007 high.
The first at 60% is S&P 500 (SPX) 667 and the second at 61.8% is 639. The next Fib. is from the ’82 low at 61.8% to the October ’07 high and that is 665. Next is a mega-trend line drawn from the 1984 to 1987 lows and it intersects our current chart at 667.
Then there is the trading zone of 1996 at SPX 630 to 680, with a mid-point of 665. Note how 665 to 667 keeps coming up — and perhaps with all of this light wizardry, that is the number to keep in mind for either the start of a meaningful rally or perhaps even the bottom.
Tomorrow, we’ll take a look at a number that other technicians are targeting as the final low of this worst bear market since the great crash of 1929 and the bear market of the 1930s.
Today’s Trading Landscape
Earnings of note to be reported include: A.M. Castle & Co, Air Methods, Alpha Pro Tech Ltd, American Public Education, Approach Resources, Baytex EnergyTrust, Boise Cascade, Boots and Coots Int’l Well Control, Boston Beer Co and Brown-Forman Corp.
CAI Int’l, Capital Senior Living, Capital Trust, China Digital TV Holding Co Ltd, Clayton Williams Energy, Collective Brands, Comverge, Dick’s Sporting Goods, DXP Enterprises, E.ON AG and Eagle Rock Energy Partners LP.
Ferrellgas Partners, General Steel Holdings, Gulfport Energy Corp, Hawk, Hovnanian Enterprises, Hypercom Corp, Information Services Group, J. Crew Group, KMG Chemicals, LHC Group, Lime Energy Co, Mako Surgical Corp and Marlin Business Services Corp.
Nautilus, NCI Building Systems, Oil-Dri Corp of America, Quadramed Corp, Reddy Ice, Salix Pharmaceuticals, Silver Standard Resources, Soco Int’l plc, Stage Stores, Take-Two Interactive Software, The Kroger Co, TriMas Corp, Trinity Biotech, Vicor, and Western Gas Partners LP.
The following economic reports are due: International Council of Shopping Centers (ICSC) Chain Store Sales Index for March 7, Redbook Retail Sales Index for March 7, January Wholesale Trade (the consensus expects negative 1.0%), API Oil Industry Report for March 6, and ABC/Washington Post Consumer Confidence for March 7.
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Sam Collins is a registered, fee-based portfolio manager who may be contacted at samailc@cox.net. You can also check out an archive of some of his most recent market outlooks by clicking here.
