Last week ended with the Dow industrials hitting a new intraday high of the year and the highest point since mid-2008. Friday’s rise was in reaction to a lower unemployment rate and better-than-expected non-farm payrolls. And the Institute for Supply Management (ISM) data showed manufacturing was slowly improving.
Daily Stock Market News
Dow: +57 points at 12,377 (up 1.3% for the week)
S&P 500: +7 points at 1,332 (up 1.4% for the week)
Nasdaq: +9 points at 2,790 (up 1.7% for the week)
Volume and Breadth
NYSE: 910 million shares traded; advancers ahead 2.2-to-1
Nasdaq: 582 million shares traded; advancers ahead 1.3-to-1
Futures and Related ETFs
May Crude Oil: +$1.22 at $107.94 per barrel; Energy Select Sector SPDR (NYSE: XLE) +24 cents at $79.99
April Gold: -$10.80 at $1,428.10 per ounce; PHLX Gold/Silver Sector Index (NASDAQ: XAU) -$1.81 at $214.93.
What the Markets Are Saying
With just 910 million shares trading on the first day of the second quarter, the bulls managed to push the Dow to a new intraday high and missed a closing high by just 14 points. The S&P 500 closed on its March high at 1,332, but the Nasdaq is still lagging and rose just 0.31%, missing the March high by over 50 points.
Friday’s trading pattern was like four of the five days of the week, with stocks opening higher only to gradually give back much of the gains by the close. Tuesday broke the pattern by opening sharply lower on a drop in consumer confidence and downgrades of European bonds, and then rallied for the remainder of the day, closing higher.
The best news is that Friday’s new Dow high confirmed that its deep sell-off of mid March has been neutralized and that the senior index is again in an uptrend. Even though the other indices have lagged, all have successfully exceeded their respective 50-day moving averages, and the S&P 500, as noted, is within range of its immediate resistance, the March high of 1,332.46 (but still about 12 points from the February high).
This weekend, Mark Arbeter, chief technician at Standard & Poor’s, made note of the unusual “V” bottom that we discussed last week. Mark noted that there is normally some “backing and filling” following a sharp sell-off like the mid-March massacre. But he thinks that the S&P 500 or Nasdaq will continue on to new highs before we see a pullback.
Not much was made of the emerging markets story last week. After breaking down earlier, the iPath MSCI India Total Return Index ETN (NYSE: INP) and iShares FTSE/Xinhua China 25 Index Fund (NYSE: FXI) completed solid bottoms and appear to be back on track.
Even though the U.S. markets may successfully test the February highs, the lack of conviction as measured by volume is troublesome. And from a technical perspective, the rare “V” recovery is not a long-term positive sign either. My guess is that even if new highs are made by the S&P 500, the Nasdaq may not follow through since it has not taken the lead on the recent rebound.
The most sensible approach is to be a very cautious bull. Hold cash, gold and inflation-protected ETFs. Short-term trading is OK, but only with trailing stop-loss orders. This is not the time to chase speculative stocks that are close to old highs.
For one ETF to trade 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.
