Neither the downgrade of Portugal’s and Greece’s debt ratings, nor a lower-than-expected consumer confidence number could hold stocks back yesterday. It was the seventh time in nine sessions that stocks gained, and since we close the books on Q1 2011 tomorrow, the gain could be attributed to institutional “rebalancing.” Telecommunications, energy and materials stocks were the leading groups. 

Daily Stock Market News

Dow: +81 points at 12,279
S&P 500: +9 points at 1,319
Nasdaq: +26 points at 2,757

Volume and Breadth

NYSE: 805 million shares traded; advancers ahead 2.1-to-1
Nasdaq: 426 million shares traded; advancers ahead 1.9-to-1

Futures and Related ETFs

May Crude Oil: +81 cents at $104.79 per barrel; Energy Select Sector SPDR (NYSE: XLE) +96 cents at $79.46
April Gold: -$3.70 at $1,416.20 per barrel; PHLX Gold/Silver Sector Index (NASDAQ: XAU) -0.07 points at 211.47

What the Markets Are Saying

After struggling in mid-March, it now appears that the month is well on its way to producing a solid gain. If the first quarter of 2011 had closed yesterday it would have a 5% gain making it the best Q1 since 1998. 

Looking forward, according to the 2011 Stock Trader’s Almanac, April should shine as well. The Almanac says that since 1950, April has been the best month for the Dow, averaging a return of 2%. April was the first month ever to gain 1,000 Dow points (1999), and has been up for five consecutive years, averaging a gain 4.3%. And in pre-presidential election years since 1951, the average gains for all indices are even higher with the Dow up 4.3%, S&P 500 up 3.7%, and the Nasdaq up 3.7%.

But, of course, April is not always a winning month. In the past 61 years it has gained in 39 years and lost in 22. These are not bad odds, but using statistics alone while ignoring the other technical and fundamental issues can lead investors in the wrong direction.

As the market closes out Q1, we expect to see some institutional portfolio rebalancing, and that could account for the string of gains since mid-March. But rebalancing is nothing more than portfolio managers making themselves look good when their Q1 holdings are published. They want to be holding “successful” stocks even if it doesn’t mean that the stocks are profitable since some could have been bought during the final days of the quarter.

Overhanging the market is the prospect of an end to QE2. We heard yesterday from one of the CNBC regulars in Chicago that the Fed has been actively buying bonds for over two weeks and will probably continue buying right up until time and money run out. So, for several weeks, new money from the government has gone into the bond markets. But that appears at odds with the record of falling bond prices.

So where did the money go? That’s easy — it has, and is, going into stocks; thus bonds down, stocks up. Recently, at least one Fed governor has been quoted as favoring an early end to QE2. But that sounds more like the Fed exercising one of its most important powers — “moral suasion.” Or is it “amoral suasion”? (Over 50 years ago, when asked on an economics exam to name the powers of the Federal Reserve, I missed that one and will never forget it.)

Finally, there is the technical condition of the market. Our internal indicators are unanimously overbought. And the deep V-bottom of mid-March could be a negative formation rather than a positive one. The market is very close to the major resistance at S&P 1,332, and resistance lines are usually the best place to sell, not buy — that’s what makes them resistant to penetrations. I’ll cover more on the deep V-bottom tomorrow.

For one stock to sell 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.