Stocks closed on the plus side on the last day of the month, kicking off the year with the first positive finish for a January since 2007, and the Dow’s strongest January since 1997. Blue chips led the gain when oil prices jumped to a two-year high, and that pulled buyers into oil and gas equipment stocks, exploration companies and drillers.
Daily Stock Market News
Dow: +68 points at 11,892
S&P 500: +10 points at 1,286
Nasdaq: +13 points at 2,700
Volume and Breadth
NYSE: 1.2 billion; advancers ahead by 2.3-to-1
Nasdaq: 559 million; decliners ahead by 1.4-to-1
Futures and Related ETFs
March Crude Oil: +$2.85 at $92.19; Energy Select Sector SPDR (NYSE: XLE) -31 cents a barrel at $71.11
April Gold: -40 cents per ounce at $1,334.10; PHLX Gold/Silver Sector Index (NASDAQ: XAU) +0.91 points at 202.83
What the Markets Are Saying
While there is no denying the fact that January had a gain, Monday’s rebound came at the expense of the economy as crude oil prices rose to a two-year high. Thus, energy stocks were the driving force behind the bounce.
While the headlines were all about the “strongest January in 14 years” with the Dow gaining 68 points, Friday’s drubbing — which took away 166 Dow points and led to a 7-to-1 bearish sell-off — was ignored. It was the second bearish signal in seven days, so despite the glowing headlines, the yellow flag is flying.
Friday’s downdraft was important for several reasons:
1. As noted, it was the second sell-off in seven sessions.
2. On the NYSE, down volume was ahead of up volume by 7-to-1 and 9-to-1 on Nasdaq.
3. The S&P 500 closed under its 20-day moving average on Friday for the first time since Nov. 30, but revived and closed above it yesterday. The Nasdaq fell below its 20-day on Friday, but failed to rise above it yesterday.
4. Most importantly, the Dow Jones Transportation Average (a leading indicator) has broken not only its 20-day moving average, but on Friday, closed under its 50-day and failed to rise above it yesterday. This failure of the transports, with lower highs and lower lows, flashes a “non-confirmation” of the Dow averages and a serious danger signal for the broad market. In order to neutralize this signal, it must close above the Friday peak of 5,170.85.
In spite of the overhanging threat to the world economy, energy and oil stocks have vaulted into high gear. The technical affirmation of the group should lead to more new highs as the crisis in the Middle East becomes more complex. Investors should jump on energy stocks and ETFs now in order to take advantage of the current momentum, which could last until crude is well above $100 per barrel.
Where should investors focus their buying power? Not on the international giants, but on the stocks of domestic producers, which could easily capture gains of 20% or more. For one ETF to buy, 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.
