On Friday, stocks rose for the first time in three days, despite extensive damage in Japan from the strongest earthquake in 300 years. But the week ended lower as energy and technology stocks pulled the market down through near-term support levels.

Daily Stock Market News

Dow: +60 points at 12,044 (-1% for the week)
S&P 500: +9 points at 1,304 (-1.3% for the week)
Nasdaq: +15 points at 2,716 (-2.5% for the week)

Volume and Breadth

NYSE: 921 million shares traded; advancers ahead 1.8-to-1
Nasdaq: 504 million shares traded; advancers ahead 1.2-to-1

Futures and Related ETFs

April Crude Oil: -$1.54 at $101.16 per barrel; Energy Select Sector SPDR (NYSE: XLE) +$1.28 at $75.11
April Gold: +$9.30 at $1,421.80 an ounce; PHLX Gold/Silver Sector Index (NASDAQ: XAU) +3.89 points at 206.81

What the Markets Are Saying

Despite the news from Japan, which may not have yet impacted our markets, stocks rebounded Friday following three down days. Each index posted a minor daily reversal up, but this only signals a very short-term rally, which could continue today or may have already run its course as it took back a small portion of Thursday’s big gap down.

The Dow and S&P 500 did manage to close above their respective 50-day moving averages and have support at Thursday’s low at 11,975 and 1,294, respectively. This means that if they are able to successfully test Thursday’s low and hold, there is a slight possibility that they could form a sideways descending triangle with resistance at just above the 20-day moving averages of each index. The Dow’s 20-day is at 12,177, and the S&P’s is at 1,320.

But all three major indices have broken down on point-and-figure charts. The Dow and S&P 500 provide the most positive outlook, but the Nasdaq has suffered severe damage: Even though it executed a minor reversal on Friday, last Thursday’s gap down through its 50-day moving average thrust it into an intermediate-term trend shift. And Friday’s low-volume (504 million shares) reflex rally was pitiful, indicating that the decline is not over for the Nasdaq.

Conclusion: Unless the Nasdaq can somehow reverse last week’s change of trend, it is likely that it will continue to pull the broad market lower. Friday’s low-volume minor reversal appears to be no more than a reflex bounce. The markets have been very sensitive to economic news, and so the impact of the tragedy in Japan may still bring in sellers providing us with a feel for the support levels under Thursday’s closes and the level of commitment of Friday’s buyers. 

Investors should remain defensive until the current near-term downtrend for the Dow and S&P 500 are reversed and the intermediate downtrend in the Nasdaq finds solid support. 

For one stock to short 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.