Use Pullbacks as Buying Opportunities
Sam Collins<p><p>Sam Collins is InvestorPlace.com's Chief Technical Analyst. He has more than four decades of experience in Wall Street firms.</p></p><p><p>In addition to providing fundamental and technical analysis for InvestorPlace.com, he provides FREE daily market commentary each trading day via the <em>Daily Trader's Alert</em>. The <em>Daily Trader's Alert</em> contains his Daily Market Outlook PLUS a Trade of the Day.</p></p><p><p>Sam served as a regular army captain serving in West Germany during the Berlin Wall Crisis before joining Merrill Lynch as a futures broker. Since then, he has been a financial adviser, branch manager, regional manager and certified portfolio manager with national and regional securities firms. While he retired in October 2009, during his career, he received recognition and numerous awards.</p></p><p><p>Sam used technical analysis as a timing and selection technique with portfolios that he managed. He developed a specific technical analysis technique and timing system called the Collins Bollinger Reversal (CBR) that has received national recognition, and he has appeared on local and national TV as a financial commentator.</p></p><p><p>As an equity specialist and technician, he uses technical analysis as a selection technique along with fundamental analysis. As a value buyer, his goal is to find companies with outstanding management, unique products and strong financials that have not yet been driven to unreasonable prices. His CBR system helps him to screen vast amounts of data for stocks that meet those standards.</p></p>Sam is also a member of the NASD Board of Arbitrators.Stock Market Today
Stocks rose Thursday after the Bank of England said it might deploy further stimulus, and bank stocks shone following better-than-expected earnings.
Financials were the best-performing sector of the S&P 500, up 0.9%, and the KBW Nasdaq Bank Index, which tracks large commercial lenders, rose 1.7%. JPMorgan Chase & Co. (NYSE:JPM) led the big banks, up 1.5%, after reporting strong quarterly results. Wells Fargo & Co (NYSE:WFC) and Citigroup Inc (NYSE:C) gained 1.4% and 2.6%, respectively. Dow member Goldman Sachs Group Inc (NYSE:GS) was up 2.9%, and Metlife Inc (NYSE:MET) jumped 4.7%.
The Dow Jones Transportation Average rallied 1.1%, helped by advances in Delta Air Lines, Inc. (NYSE:DAL), up 3.6%, and CSX Corporation (NASDAQ:CSX), up 3%.
The technology sector also did well, up 0.7%, led by Apple Inc. (NASDAQ:AAPL), which gained 2%, and its supplier Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM), up 0.8%.
But while crude oil rebounded 2.1% to $45.68 a barrel, not all energy stocks followed suit. NRG Energy Inc (NYSE:NRG) fell 3.5%, Southwestern Energy Company (NYSE:SWN) lost 3.5% and Range Resources Corp. (NYSE:RRC) lost 2.4%.
The yield on the benchmark 10-year U.S. Treasury note rose to 1.53% from 1.48% on Wednesday. Gold fell 0.9% to $1,332.20 an ounce.
At Thursday’s close, the Dow Jones Industrial Average gained 134 points at 18,506, the S&P 500 advanced 11 points at 2,165, the Nasdaq was up 28 points at 5,034, and the Russell 2000 added 0.8% at 1,202.
The NYSE Composite’s primary exchange traded 837 million shares with total volume of 3.5 billion. The Nasdaq crossed 1.6 billion shares. On the Big Board, decliners outpaced advancers by 1.2-to-1, and on the Nasdaq, decliners led by 1.4-to-1. Block trades on the NYSE declined to 5,188 from 6,117 on Wednesday.
Financial stocks finally became part of the group rotation that started several weeks ago. However, Thursday’s breakaway gap in the Financial Select Sector SPDR Fund (NYSEARCA:XLF) faltered, as the ETF failed to successfully attack the May high at $23.93. It reversed in the afternoon and closed just 6 cents off its low of the day.
Volume was higher than normal but picked up on profit-taking in the afternoon. MACD is slightly overbought.
Conclusion
Thursday’s early rally was earnings-based, which was just what the doctor ordered. But as the day wore on, it became apparent that the market’s slightly overbought situation was taking a toll. Each of the major exchanges closed with more decliners than advancers.
From here, it’s likely we’ll see a period of profit-taking and then a run up of 5%-plus, that is if earnings support higher prices. Support is close at hand, so any pullback should be a good buying opportunity.
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.