Friday’s holiday-shortened session focused on “the crisis of the hour”: Dubai. But following a sell-off on Thursday in other parts of the world, those markets stabilized on Friday. Thus, the initial financial crisis with the Dubai debt payments never had a full impact in this country.
During the weekend, actions by the United Arab Emirates central bank appeared to at least temporarily delay the crisis. But other Arab states, like Abu Dhabi, which helped bail out Dubai earlier this year, said that they have not yet indicated fresh support. And even the UAE central bank only offered “support” to local banks, but said nothing of Dubai.
At the close, the Dow Jones Industrial Average (DJI) was off 154 points to 10,310, the S&P 500 (SPX) fell 19 points to 1,091, and the Nasdaq (NASD) fell 38 points to 2,138.
The NYSE traded just 654 million shares with decliners over advancers by 5-to-1. On the Nasdaq, 364 million shares changed hands with decliners ahead by just over 5-to-1.
For the week, the Dow fell 0.1%, the S&P 500 was unchanged, and the Nasdaq fell 0.4%.
On Friday, commodities were generally hit hard by the new financial crisis in Dubai.
January crude oil fell $1.91 to $476.05 a barrel. The Energy Select Sector SPDR (XLE) rose 45 cents, closing at $58.11.
February gold fell $13.10 to $1,175.50 an ounce, and the PHLX Gold/Silver Sector Index (XAU) fell $7.28, closing at $183.52.
What the Markets Are Saying
Despite a brewing global financial crisis over Dubai and a host of other problems, the U.S. stock market has stubbornly held above the first line of support — the 20-day moving average. But, the bears would argue that neither has it has broken to new highs since Nov. 16.
The overall pattern, however, has been deteriorating, with the internal indicators now agreeing that a pullback is warranted.
On Friday, the stochastic on the S&P 500 issued a sell signal, and momentum on the Nasdaq has turned negative, confirming that a pullback there is under way.
So it appears that we may be headed for a minor correction. I say “minor” because during the dramatic rally from the March lows, the averages have been able to establish a series of support zones that should be difficult to penetrate.
First is the support at the 50-day moving average of the S&P, which is now at 1,074, then the 1,020 to 1,070 support zones established from late August to early November. There is also the broad zone of support at 980 to 1,010, set in July and early August. And, finally, the 200-day moving average at just under 950.
So, despite the hesitation and lack of momentum in the past week, most stocks are in strong, long-term bull markets, and more than likely will not break down. And there appears to be a consensus that when we ring in the new year, fund managers will be buying back a host of technology and other more volatile stocks.
Perhaps it is time to cash in some gains and “buy American” — the economy needs all of the help we can give it.
Today’s Trading Landscape
Earnings to be reported include: Inergy (NRGY), Guess (GES), OmniVision (OVTI), Steak n Shake Co. (SNS) and Zoltek (ZOLT).
Economic report due: Chicago Purchasing Managers Index (PMI) (the consensus expects 53).
Your Guide to Profiting From Asia’s Explosive Growth
For access to the best-kept secrets about investing in China and the rest of Asia, plus the hottest stocks to buy and sell, sign up now for Robert Hsu’s FREE investing newsletter, Asia Insider. It’s sent right to your e-mail inbox every week — absolutely FREE!
