Following a lower opening from a mixed bag of earnings capped by a wider-than-expected loss from Morgan Stanley (MS), stocks rallied and by 11 a.m., the Dow (DJI) was pushing the 8,050 line with upside volume picking up.
But the afternoon was characterized by choppy trading from some confusion about whether the banks would or would not be allowed to pay back their bailout funds. During testimony on Tuesday, Treasury Secretary Tim Geithner indicated that the government might, instead of accepting paybacks, insist on taking an equity position in the banks. But then yesterday he seemed to back away saying that he “would welcome strong banks repaying bailout funds to the government.”
The problem seems to be in the interpretation of what, in the eyes of the government, is a “strong bank.” On Friday the banks will begin their evaluations under the “stress test” provisions, and it is then that investors may learn the characteristics of “strong” versus “weak.”
General Motors’ (GM) shares closed down just a penny despite a report from The Wall Street Journal that GM won’t be able to make a $1-billion debt payment due on June 1. With many banks holding GM paper, the financial sector took the news badly.
During the final hour of trading the banks led a broader sell-off so what looked like a positive day on Wall Street in the last hour turned negative with the Dow plunging 150 points and ending negative for the day.
At the close, the Dow Jones Industrial Average (DJI) was down 83 points to 7,887, the S&P 500 (SPX) fell seven points to 844, but the Nasdaq (NASD) bucked the selling and gained more than two points to 1,646.
The New York Stock Exchange traded 1.8 billion shares with advancers slightly ahead of decliners while the Nasdaq traded 892 million shares and it, too, registered just slightly more advancing than declining issues.
The June crude oil contract rose 30 cents to $48.85 a barrel, and the Amex Energy SPDR (XLE) fell 47 cents to $43.95.
Gold for June delivery gained $9.80 to $892.50 an ounce. The PHLX Gold/Silver Index (XAU) closed at $116.18, up 9 cents.
>
What the Markets Are Saying
At the end of each trading day I scan — more accurately my computer scans — hundreds of key stocks and indices for various trading signals. In the past week that exercise has shown a number of stocks that had retreated just a bit while the news on their industry or the market remained positive. I’ve reported this to you as a negative sign that usually precedes selling.
Then, yesterday, the daily exercise turned up a major short-term sell signal from one of our most reliable indicators — the Moving Average Convergence/Divergence (MACD). The performance of MACD in the current cycle has been noteworthy among most of the other technical indicators with an almost 100% record of accuracy in the past 11months.
On May 7, 2008, the MACD issued a sell signal at Dow (DJI) 12,814 followed by a buy signal on July 16 at 11,239. Then, it gave a sell signal on Aug. 19 at Dow 11,348 and a buy signal on Oct. 27 at 8,175, followed by a quick series of buys and sells of little consequence until the sell signal of Jan. 12 at 8,474.
The market almost immediately dropped following that last signal, which resulted in the market low of 6,443 on March 6. On March 11, the MACD said to buy at Dow 6,930. Finally, on Monday it issued a sell signal on the Dow at 7,842.
The MACD has proven to be a trader’s friend in a very difficult market, so I will now include it along with the slow stochastic on future charts of the major indices.
Today’s Trading Landscape
Earnings to be reported include: A.T. Cross Co, ABB, Acacia Research Corp,
Advanced Energy Industries, Alaska Airlines, Alexion Pharmaceuticals, Align
Technology, Amazon.com, American Express Co, American National Insurance,
AmeriCredit Corp, AmeriSourceBergen, Amgen, AmSurg, Anadys Pharmaceuticals,
Atheros Communications, AU Optronics Corp, AutoNation, Avid Technology, Avnet, Avocent Corp and AVX Corp.
Ball Corp, Bancorp Rhode Island, Benchmark Electronics, BJ’s Restaurants, Black & Decker Corp, Bottomline Technologies, Bucyrus Int’l, Builders FirstSource, Bunge Ltd, Burlington Northern Santa Fe Corp, Cabot Microelectronics, Canadian Pacific Railway, Capital Bank, Cash America Int’l, Catapult Communications, Cathay General Bancorp, Cavalier Homes, Celestica, Cepheid, CF Industries, Chicago Mercantile Exchange Holdings, Chubb Corp, CIT Group, City National Corp, CoBiz, Cohu, Colonial Properties Trust, Columbia Sportswear, Community Bank System, Computer Programs and Systems, Conmed, ConocoPhillips, Consol Energy, Con-Way, Cooper Industries Ltd, Credit Suisse Group and Cybersource Corp.
Danaher, Data Domain, DDi Corp, Deckers Outdoor, Delphi Financial Group, Deluxe Corp, Developers Diversified Realty Co, DeVry, Diamond Offshore Drilling, Dice Holdings, Digi Int’l, Eagle Materials, Eastman Chemical Co, EMC Corp, EMC Insurance Group, Empire District Electric, Eni S.p.A., Ensco Int’l, Exelon Corp, Extreme Networks, Ezcorp, F.N.B. Corp, Federated Investors, Fifth Third Bancorp, Financial Institutions, First Commonwealth Financial, First Financial Bankshares, First Security Group and Franklin Electric.
Gardner Denver, GATX Corp, Glacier Bancorp, Goodrich Corp, Harsco Corp, HDFC Bank Ltd, Health Grades, Hittite Microwave Corp, Home Bancshares, Hubbell, IMS Health, Informatica, Insituform Technologies, Interactive Brokers Group, Interactive Data Corp, International Game Technology, Interphase, Invacare, Invesco Ltd, ITT Educational Services, Ixia, J&J Snack Foods, Jakks Pacific, Janus Capital Group, JetBlue Airways and Juniper Networks.
KLA-Tencor, KVH Industries, L.B. Foster, L-3 Communications Holdings, Laboratory Corp of America, Lacrosse, Lakeland Bancorp, Lattice Semiconductor, Life Time Fitness, LSI Industries, Marriott Int’l, Marshall & Ilsley, Matthews Int’l, MEMC Electronic Materials, Micrel Semiconductor, Microsemi, Microsoft, Microtune, Minerals Technologies, Mohawk Industries, National Oilwell Varco, NBTY, NCR Corp, Netflix, Newfield Exploration, NII Holdings, NorthWestern Corp, Nova Chemicals, Novartis AG and Nucor.
Occidental Petroleum Corp, OceanFirst Financial, Old Dominion Freight Line, Old Republic Int’l, Omniture, Oplink Communications, Oriental Financial Group, Penn National Gaming, Performance Technologies, Philip Morris Int’l, Pixelworks, PMC Sierra, PNC Financial Services Group, Pool Corp, Potash Corp of Saskatchewan, Power Integrations, Premiere Global Services, Rambus, Ramco-Gershenson Properties Trust, Raytheon, Reliance Steel & Aluminum Co, Riverbed Technology, Roper Industries and Royal Caribbean Cruises Ltd.
Scana Corp, ScanSource, Seacoast Banking FL, Seattle Genetics, SEI, Sigma-Aldrich Corp, Silicon Image, Skyworks, Stamps.com, Standard Register, Starent Networks Corp, Sterling Bancshares, Sterling Financial Corp, Suncor Energy, SunTrust, Supervalu, Sussex Bancorp, SVB Financial Group and Synaptics.
Tanger Factory Outlet Centers, Taser Int’l, TCF Financial Corp, The Cheesecake Factory, The Hershey Co, The Inventure Group, The McClatchy Co, Thermo Fisher Scientific, TradeStation Group, Union Pacific, United Community Banks, United Parcel Service, US Airways, Valley National Bancorp, Vasco Data Security Int’l, Virginia Commerce, W.R. Grace & Co, Wesco Int’l, Western Alliance Bancorp, Western Digital Corp, Whitney Holding Corp, WSFS Financial, YRC Worldwide, and Zimmer Holdings.
The following economic reports are due: initial jobless claims for the week of April 18 (the consensus expects an increase of 33,000), DJ-BTMU Business Barometer for April 18, March Existing Home Sales, and EIA Natural Gas Inventories.
Late news: After the close yesterday, Apple Inc. (AAPL) reported Q2 results of $1.33 versus estimates of $1.09 and said it sees Q3 at 93 cents to $1 versus estimates of $1.12. Marriott’s (MAR) Q1 came in at 24 cents versus estimates of 14 cents, Fifth Third Bancorp (FITB) reported Q1 figures of 18 cents versus estimates of 27 cents, SunTrust Bank’s (STI) Q1 was 46 cents versus estimates of 65 cents, and Hershey’s (HSY) Q1 came in at 38 cents versus an estimated 53 cents.
Get Sam Collins’ Daily Trader’s Alert e-mailed straight to your inbox each morning before the opening bell absolutely FREE!
In addition to getting instant access to his Daily Market Outlook, you’ll also receive, in the same e-mail, his Trade of the Day so you can start your day off right by positioning yourself for profits!
Click here today to sign up today for Sam’s FREE Daily Trader’s Alert!
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.
