On Monday, selling in the last 30 minutes took back 40 Dow points and a gain for the day. The biggest boost in consumer spending since October, along with a reported increase in personal income, drove stocks modestly higher in the morning. But a lack of news, concern over a downgrade of Marriott International, Inc. (NYSE: MAR) by Goldman Sachs Group, Inc. (NYSE: GS), and an announced sale of $2 billion of debt by The Home Depot, Inc. (NYSE: HD) led to the late selling.

Daily Stock Market News

Dow: -23 points at 12,198
S&P 500: -4 points at 1,310
Nasdaq: -12 points at 2,731

Volume and Breadth

NYSE: 784 million shares traded; decliners ahead 1.5-to-1
Nasdaq: 444 million shares traded; decliners ahead 1.4-to-1

Futures and Related ETFs

May Crude Oil: -$1.42 at $103.98 per barrel; Energy Select Sector SPDR (NYSE: XLE) -19 cents at $78.50
April Gold: -$6.30 at $1,419.90 per ounce; PHLX Gold/Silver Sector Index (NASDAQ: XAU) -$3.12 at $211.54

What the Markets Are Saying

As noted in yesterday’s Daily Market Outlook, on Friday, when the Dow and the S&P 500 popped above their respective 50-day moving averages, the big sell-off of mid-March was negated, and that, for now, puts the bulls back in charge. I wrote: “All of the major indices have participated in the rush to buy with the Dow, S&P 500 and Nasdaq breaking above their intermediate resistance lines. And the Russell 3000, which covers about 98% of all U.S. stocks, closed above its 20-day and 50-day moving averages as well.”

But now that the bulls are again in possession of the trend, they must defend their current gains before they move higher. The above chart of the S&P 500 shows the battle lines. First, in the upper right, is the resistance line 1,332. It is this line that must be crossed on a close in order for a more meaningful trend change to occur. Until it is crossed, the change in trend is still suspect. 

Yesterday’s late selling could continue today since some traders were scared out of the market as they considered the negative implications of economic reports due later this week that may not live up to expectations. The above chart also depicts the initial major support zone for a pullback at 1,290 to 1,300, supported by the 50-day moving average at 1,306. These are the first lines of the bull’s defense. We do not want to see this zone broken, but if it is, there is more support at 1,275 to 1,290. And note the buy signal from Moving Average Convergence/Divergence (MACD), which is a strong positive.

Conclusion: As I said yesterday, with NYSE volume very low and breadth unsupportive of a major breakout, it is possible that the stocks could test the highs of early March without breaking the February high. But with the first quarter of the year ending on Thursday, and some institutional portfolio rebalancing likely, the trend for this week favors the bulls.

For an energy ETF 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.