Volatility picked up yesterday, but it was especially wild on the technology-sensitive indices like the Russell 1000 Technology Index. The index bounced from high to low and back three times during the day, and just before the close ran a full 2% from its low of the day to its high in just 30 minutes. At the closing bell, however, the index was exhausted, closing with a slight loss and a failure to break into new high territory just like its blue-chip counterparts.
Daily Stock Market News
Dow: -3 points at 11,977
S&P 500: +0 points at 1,291
Nasdaq: +2 points at 2,719
Volume
NYSE: 1 billion shares traded; advancers and decliners even
Nasdaq: 504 million shares traded; decliners ahead by 1.2-to-1
Futures and Related ETFs
March crude oil: -$1.68 at $89.19 per barrel; Energy Select Sector SPDR (NYSE: XLE) -20 cents at $70.16 per barrel
February gold: -$12.50 at $1,332.30 per ounce; PHLX Gold/Silver Sector Index (NASDAQ: XAU) -1.7 points at 196.83
What the Markets are Saying
Years of technical analysis studies have taught that this type of churning at major tops represents a loss of momentum. The Dow Jones Industrial Average is a good example of this as headlines proclaimed the significance of a close above the Dow’s 12,000 level. And the same is true of the S&P 500, which last week pounded for three straight days against the 1,300 line before falling back to support at its 20-day moving average.
Yesterday’s action on the Dow industrials was most interesting because of a “spate of unusually large orders to buy shares of International Business Machines” (The Wall Street Journal) resulted in a huge spike in the stock. At around 3:18 p.m., the shares jumped $3.57 in one trade. That trade accounted for a 27-point Dow jump, which was quickly erased when IBM (NYSE: IBM) fell back to $160.89, where it had been trading just minutes before.
The Wall Street Journal’s headline for the day was “Dow Pulls Back From 12,000.” Bulls are hopeful that something positive will come from the two major events — the State of the Union Address, and the Fed’s two-day policy committee meeting. But the markets are teetering on the edge of a pullback with little support from volume or breadth, both of which have been weak. We may see another spike today on the major indices as the president’s new proposals are embraced, but spikes like that from IBM are clear signs that the stock market is on the edge of a negative reversal. (To learn how traders should play IBM today, see the Trade of the Day.)
Initial support for the S&P 500 is from 1,262 to 1,275 with its 20-day moving average at 1,278. The Dow’s initial support is at 11,865 with its 20-day moving average at 11,746. And the Nasdaq, which is the most vulnerable to a pullback, has initial support at 2,675 with its 20-day at 2,705.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.
