On Thursday stocks started flat, but solid earnings gains from American Express Company (NYSE:AXP), a Dow stock, sent the index to its high of the day at just after noon, and the stock closed up 9%. But other big names were not so positive: Verizon Communications Inc. (NYSE:VZ), Travelers Companies Inc (NYSE:TRV) and Union Pacific Corporation (NYSE:UNP) fell sharply after various, mostly negative, third-quarter reports.
Verizon fell 2.5% after reporting a decline in revenues and falling subscriber growth. It also said that it was considering renegotiating its acquisition terms with Yahoo! Inc. (NASDAQ:YHOO) which brought sellers to YHOO, which closed the day down 0.8%.
Crude oil (WTI) fell 2.3% to $50.43 per barrel after hitting its highest price in more than a year, a possible technical reversal. And gold broke its winning streak, too, falling 0.2% at $1,268 per ounce, both hit by a rising dollar. The buck gained 0.5% vs. a basket of currencies, and the euro fell to $1.09 as bankers took seriously hawkish comments by Federal Reserve Vice Chairman Stanley Fischer earlier this week.
At the close, the Dow Jones Industrial Average fell 40 points at 18,162, the S&P 500 lost 3 points at 2,141, the Nasdaq closed at 5,242, off 5, and the Russell 2000 fell 3 to 1,220. The NYSE’s primary exchange traded 793 million shares with total volume of 3.3 billion shares. The Nasdaq crossed 1.7 billion shares. On the Big Board, decliners led advancers by 1.4-to-1, and on the Nasdaq, decliners led by 1.2-to-1. Blocks on the NYSE increased to 5,211 vs. 5,071 on Thursday.
The daily chart of the Dow industrials shows an index that is caught between support at about 18,000 and resistance at its 50-day moving average at about 18,322. It tried and failed to penetrate the blue line three times since falling below it on Sept. 9.
The pattern is that of a declining triangle or wedge. It is significant only as to its resistance and support lines that can break in either direction. However, many tops include this pattern.
This chart of the Dow industrials is a one-minute chart that starts at about 11:30. It shows a high that was caused by the release of strong returns by American Express, followed by a sell-off by 2 p.m., but steady buying recovered much of the decline, only to be thwarted by massive selling on the close by institutions.
Conclusion: As noted yesterday, block buyers and sellers depend on programmed algorithms that can trade millions of shares in a second. They capture miniscule gains/losses, but with little to encourage a more permanent trend, the traders are happy to retrieve gains, even if they cause a flat trend for a short time.
Eventually the support and resistance lines will break in one direction or the other. The Fed and perhaps even earnings may be prime catalysts to break the sideways trend.
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.
