Friday closed lower for the third-consecutive day and turned the week negative, too. It was the worst week for the market in more than two months, with the S&P 500 (SPX) down 2.2%.
Most of the losses could be attributed to disappointing economic news. A drop in durable goods orders and a smaller-than-expected rise in new home sales had an impact on the financial and building group.
And the Nasdaq (NASD) fell when BlackBerry maker Research In Motion (RIMM) said that future profits would not meet prior expectations. RIMM fell 17%, and Nasdaq was off .08%.
But there was some positive news: General Mills (GIS) reported fiscal Q1 earnings that topped estimates. And Sara Lee (SLE) jumped 6.4% after Unilever said that it will buy personal care brands from them for $1.9 billion.
At the close, the Dow Jones Industrial Average (DJI) was off 42 points to 9,665, the S&P 500 fell 6 points to 1,044, and the Nasdaq was down 17 points to 2,091.
The NYSE traded 1.2 billion shares with decliners ahead by about 8-to-7. On the Nasdaq, 677 million shares were exchanged with decliners ahead by 3-to-2.
On Friday, crude oil (November contract) rose 13 cents to $66.02 a barrel, and the Energy Aelect Sector SPDR (XLE) fell 7 cents to $53.56.
Gold for December delivery fell $7.30 to $991.60, and the PHLX Gold/Silver Index (XAU) was down $2.33 to $158.51.
What the Markets Are Saying
Friday was as dull as it gets, with low volume and breadth just slightly on the downside — and it was the same in virtually every market. But so far the immediate support at the 20-day moving average line of the major indices is holding.
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There were a number of comments about Wednesday’s action and some called it a “key reversal day” (KRD), but it was not. A key reversal day in an uptrend is a day which starts off very strong, often on a gap in trading, and ends the day lower than where it ended the day before, and volume is huge.
On Wednesday, prices opened just slightly higher and then sagged until the low of the day was reached at around 11 a.m., and then worked higher until reaching the opening price at noon where it traded for most of the day. At around 3 p.m., a burst of buying set a new high, but profit-taking hit hard in the last 15 minutes of trading and prices ended lower than the prior day’s low.
Almost all analysts agree that a KRD must have much larger volume — even two or three times greater than the average of the last three months. Volume on Wednesday was only 1.3 billion shares, which is lower than the average three-month volume.
So, two characteristics of Wednesday’s key reversal day were lacking — a higher opening and much higher-than-average volume.
It did qualify, however, as a simple reversal but with little probable impact unless the market continues lower. And, if that happens, it will become a Collins Bollinger Reversal (CBR), our own internal indicator and one that could be telling us that at least a minor top has formed. But if it closes higher, then the CBR is negated and, additionally, if the market closes higher than the day of the signal, it becomes a strong buy signal.
This brief hesitation appears to be no more than that. There is still a lot of money in money markets and the support under the market is strong. Buy on weakness.
Today’s Trading Landscape
Walgreen Co. (WAG) reports earnings today.
There are no significant economic reports due.
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