Despite a slow start, retail stocks led the market to its second straight modest gain. But the S&P 500 again failed to hold above the important resistance at 1,100, and most of the day was spent overcoming a lower opening.
A weak opening ignored Target Corporation’s (NYSE: TGT) pre-opening report of better earnings even though it was followed by assurances of solid earnings for the remainder of the year. It wasn’t until the technology sector rallied, followed by retail stocks, that the broad market turned up. TGT closed the day with a gain of 2.5%.
The leading group in the technology sector was the semiconductor stocks. SanDisk Corporation (NASDAQ: SNDK) gained 3%, and Micron Technology, Inc. (NASDAQ: MU) and Texas Instruments Incorporated (NYSE: TXN) rose 1.9% and 0.9%, respectively.
Potash Corp. of Saskatchewan (NYSE: POT) turned down an offer by BHP Billiton Limited (NYSE: BHP), but BHP indicated that it would pursue POT and, if necessary, even press for a hostile takeover. POT rose 3.32% and BHP fell 2.89%.
Treasury bonds were flat yesterday, and the U.S. dollar closed slightly higher.
At the close, the Dow Jones Industrial Average was up 10 points to 10,416, the S&P 500 gained 2 points to 1,094, and the Nasdaq gained 6 points to 2,216.
The NYSE traded 922 million shares with advancers ahead of decliners by 1.4-to-1. The Nasdaq crossed 493 million shares and advancers there were just slightly ahead of decliners.
Crude oil for September delivery fell 35 cents to $75.42 a barrel. The Energy Select Sector SPDR (NYSE: XLE) fell 52 cents to $53.71.
December gold rose $3.10, settling at $1,231.40 an ounce, and the PHLX Gold/Silver Sector Index (NASDAQ: XAU) rose $3.46 and closed at $180.84.
What the Markets Are Saying
Yesterday, Street Smart Report Online noted an unusual bearish formation called a broadening top (horn) that is imbedded in the possible head-and-shoulders top discussed in the Daily Market Outlook for several months. I brought this formation to our readers’ attention on July 6, citing it as one of the four reasons why I concluded that we were in a bear market, saying “many [of the indices] are forming a ‘horn’ or ‘broadening top’ — an unusual but highly accurate formation most often seen at market tops.”
I was, of course, referring to the enormous “horn” with its apex in November with a pattern of higher highs and lower lows extending to the high of April 23 and the low of July 2. The more recent pattern, and the one cited by Street Smart, extends from an apex in mid-May to the June and August highs and lows of May and July. Street Smart goes on to say that the “creation of the pattern reflects a period of time when bulls and bears are battling to gain control of the market.” Finally, the high volatility created by this struggle “creates a sense of uncertainty, leads to profit-taking, and deters some of the bulls from making any further commitments. The bears eventually triumph.”
This formation is so obscure but historically accurate that I’ve included a copy of the Dow Industrials with the two “horns” clearly outlined with support and resistance lines.
This odd formation occurs not only on the Dow, but also on the Dow Transportation Average, the S&P 500 and the NYSE Composite Index. Beware of the horn.
Today’s Trading Landscape
Earnings to be reported before the opening include: 1-800-FLOWERS, Bon-Ton Stores, Cato, Children’s Place, Dick’s Sporting Goods, Dollar Tree, Flowers Foods, Gamestop, Global Sources, HiSoft Tech, Lancaster Colony, LSI Industries, MagneTek, Navios Maritime, New York & Co., Ross Stores, School Specialty, Sears Holding Corp., Stage Stores, Staples, Stein Mart, Tech Data, Toro, Williams-Sonoma and Yingli Green Energy.
Earnings to be reported after the close include: Aeropostale, Blue Coat, China Finance Online, Dell, Foot Locker, Gap, Hewlett-Packard, Intuit, Marvell, Mentor Graphics, Nordson, Salesforce.com, ScanSource, Wet Seal and Zumiez.
Economic reports due: Fed balance sheet, money supply, jobless claims (the consensus expects 480,000), leading indicators (the consensus expects 0.1%), and Philadelphia Fed survey (the consensus expects 7).
If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.
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