After six hours of flailing around, with the indices up in the morning and then sharply lower in the afternoon, the Dow (DJI) put on a 10-minute show of buying that closed the market in positive territory for the day. In that last burst of energy, the Dow Industrials gained more than 100 points, with buyers diving into a broader base of stocks.
In the morning session, the Dow rose more than 200 points due to better-than-expected durable goods orders (up 3.4%) and new home sales (up 4.7%). But in the afternoon disappointment about a lukewarm reception to the Treasury’s five-year note auction erased the gains and by 3 p.m. Eastern the Dow was down more than 100 points.
The burst of buying energy near the close was attributed to several large programmed buyers who bought a broader list of stocks. This drove the Dow Industrials (DJI) to close higher by 90 points to 7,750, the S&P 500 (SPX) to rise eight points to 814, and the Nasdaq (NASD) to increase by 12 points to 1,529.
The New York Stock Exchange traded 1.8 billion shares with advancers over decliners by 7-to-3. The Nasdaq exchanged 870 million shares and advancers there exceeded decliners by better than 2-to-1.
The May crude oil contract fell from the highest levels in six months, down $2.21 to $52.77 a barrel. The Amex Energy SPDR (XLE) fell 22 cents to $45.44.
Gold for April delivery gained $12 at $935.80 an ounce, and the PHLX Gold/Silver Index (XAU) rose $4.16, closing at $139.41.
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What the Markets Are Saying
Despite yesterday’s closing rally, the overall chart pattern remains unchanged, with all of our most-watched internal indicators overbought and most of the sentiment indicators showing more complacency with the public now becoming very bullish. So with the market’s internals now at their weakest, the bulls are attempting an attack on the most formidable overhead of the entire bear market.
Mark Arbeter of Standard & Poor’s agrees that the likelihood of a near-term pending change in trend is unlikely. But Mark does make six excellent points as he concludes that the current rally has been stronger than the rally off of the November lows.
First, the price rise during a 10-day period has been greater than the move off of the November lows. Second, the S&P 500 (SPX) is now above its 65-day exponential moving average — that was not the case in November.
Third, this rally has penetrated a down-sloping Relative Strength Index (RSI) line drawn from October 2006. Fourth, the up/down volume on the NYSE has reached its highest peak since 2003.
Fifth, the 10-day NYSE up-issues ratio has exceeded the peak of the November rally. And, finally, the percentage of stocks hitting 52-week lows in March was 26% while the percentage at the November low was 58%, despite March being at a lower level on the S&P index than in November.
All of this analysis, however, doesn’t preclude the likelihood of a strong sell-off that could even result in a new low, though Mark’s points are well taken. So, with the strong likelihood of renewed selling, it would be wise to cover shorts at break-even levels or for a slight profit, and then wait for the inevitable signal that will tell us the direction of the next move after that.
Bear markets are designed to test one’s patience but for those who can endure, the rewards are worth the wait.
Today’s Trading Landscape
Earnings to be reported include: Accenture, ARYx Therapeutics, Best Buy Co, Birner Dental Management Services, China Housing & Land Development, China Life Insurance Co Ltd, China Transinfo Technology Corp, Companhia de Saneamiento Basico, ConAgra Foods, Conn’s, Cornerstone Therapeutics and Dr. Pepper Snapple Group.
Embraer-Empresa Brasileira de Aeronautica S.A., Flexible Solutions Int’l, Fred’s, FreeSeas, Gamestop Corp, Global Crossing, HearUsa, Intelli-Check, lululemon athletica, New York Mortgage Trust, Rosetta Genomics Ltd, Scholastic, Spectrum Control, Synnex Corp, Texas Industries, TIBCO Software, UTi Worldwide, and Xyratex Ltd.
The following economic reports are due today: Initial Jobless Claims for the week of March 21 (the consensus expects an increase of 8,000), Q4 Final GDP (the consensus expects negative 6.7%), DJ-BTMU Business Barometer for March 14, and EIA Natural Gas Inventories for March 20.
Late news: New aid to the auto industry seems inevitable. And, today, Treasury Secretary Tim Geithner will testify before Congress on new levels of financial regulation.
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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.
