On Friday, stocks closed higher after three days of losses. But the week closed with a loss of 1.7% for the S&P 500 — the largest weekly loss of the year. Libya, which produces around 2% of the world’s crude oil, is in political chaos, and that sent stocks lower until Saudi Arabia stepped in on Friday, saying that they could increase production and make up for any shortfalls.

Also on Friday, The Boeing Company (NYSE: BA) won a major contract, and the Consumer Sentiment Index rose to the highest level in three years.

Daily Stock Market News

Dow: +62 points at 12,130
S&P 500: +14 points at 1,320
Nasdaq: +43 points at 2,781

Volume and Breadth

NYSE: 953 million shares traded; advancers ahead 4.2-to-1
Nasdaq: 525 million shares traded; advancers ahead 4-to-1

For the Week:

Dow: -2.1%
S&P 500: -1.7%
Nasdaq: -1.9%

Futures and Related ETFs

April Crude Oil: +60 cents at $97.88 per barrel; Energy Select Sector SPDR (NYSE: XLE) +$1.22 at $77.94
April Gold: -$6.60 at $1,410 per ounce; PHLX Gold/Silver Sector Index (NASDAQ: XAU) +3.78 points at 212.21

What the Markets Are Saying

The first three days of last week looked like the opening of a horror movie as street scenes of rioting crowds and burning vehicles flashed across TV screens from several Middle Eastern countries. The major indices fell sharply in direct relation to threats to oil supplies, and stocks plunged through crucial technical support lines. 

But, by Friday, the theme turned more positive and ended like the typical old-fashioned western with the cavalry (Saudi Arabia) coming to the rescue with offers to stabilize the oil supply. And even though the buying lacked volume, the breadth was good and stocks managed to close out the week with a rally.

This is the first pullback for the markets since November, and the move down occurred in just three shocking days. During that time, the two most important indices on which we focused were the S&P 500 and Nasdaq. The S&P 500 because of its broad makeup and the Nasdaq as the former bull market leader. From intraday high to intraday low, the S&P 500 had a decline of 3.7%, and the Nasdaq fell 4.7%. Normal bull market corrections usually fall into the 5% to 8% range and take a number of weeks to wind out. 

The three major indices violated their near-term support and their 20-day moving averages. But two of the three — S&P 500 and Nasdaq — reversed back up and closed slightly above their respective 20-day averages. And the Nasdaq rallied above its 20- and 50-day moving averages and a resistance line drawn from its January highs at 2,765, successfully neutralizing its decline. 

But two of the major indices must close above some key resistance numbers before their violent breakdowns can be considered reversed: The Dow must close above the resistance from Friday’s close at 12,130 to 12,221 (20-day at 12,174), and the S&P 500 must close over 1,325.

The Nasdaq’s neutral position is encouraging, but last week’s two high-volume down days, a 20-to-1 and 10-to-1 down, are disturbing. The CBOE Volatility Index (VIX), which jumped from 15.54 to 23.22 in just two days, is troubling, as is its strong Moving Average Convergence/Divergence (MACD) sell signal on Tuesday. And our momentum indicator has not yet turned positive on any of the major indices.

Conclusion: The leading index, the Nasdaq, has successfully neutralized its near-term decline, but the Dow and the S&P 500 have yet to turn the near-term tide back up. Thus, the red flag is still flying for the short-term trend. However, the intermediate- and long-term trends are still in bull markets.

For an oil stock to buy now, see the Trade of the Day.

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.