There were many reasons for stocks to make big gains yesterday. A better-than-expected ADP employment report and a strong ISM service index should have been enough alone to move stocks higher. And better-than-expected earnings from a broad spread of sectors were encouraging to buyers.

The July ADP employment change showed that 42,000 jobs were added, which was greater than an expected increase of 25,000. The ISM service index was expected to be at 53 and came in at 54.3.

Priceline.com (NASDAQ: PCLN) jumped 22% following a report that its quarterly earnings rose 22%, which easily beat analysts’ forecasts. Expedia, Inc. (NASDAQ: EXPE) and Amazon.com , Inc. (NASDAQ: AMZN) gained, and Polo Ralph Lauren Corporation (NYSE: RL) and Coach, Inc. (NYSE: COH) also had big gains, leading the consumer discretionary sector to a 1.5% gain.

Health care stocks had gains of 0.9%. Pfizer Inc. (NYSE: PFE) rose 1.7%, UnitedHealth Group Inc. (NYSE: UNH) rose 1.5%, and Tenet Healthcare Corporation (NYSE: THC) gained 5.2%.

Barnes & Noble, Inc. (NYSE: BKS) jumped 19% after announcing that it will explore possible buyout offers. The announcement seemed to some to be an admission that online shopping, the economy and electronic books had eaten into their revenues. Walgreen Company (NYSE: WAG) fell 1.1% after same-store sales for July failed to meet expectations. 

But a major “fly in the ointment” turned out to be in China. The Chinese Central Bank announced that it has requested stress tests of their banks. Almost immediately, stocks began to decline from the high of the day and never recovered back to that level.

The euro fell versus the U.S. dollar. And the greenback gained 0.4% versus a package of six other currencies.

At the close, the Dow Jones Industrial Average was ahead by 44 points at 10,680, the S&P 500 rose 7 points to 1,127, and the Nasdaq gained 20 points to 2,304. 

The NYSE traded 975 million shares with advancers ahead of decliners by 2.76-to-1. The Nasdaq exchanged 560 million shares with advancers ahead by 2-to-1.

Crude oil for September delivery fell 8 cents to $82.47 a barrel, and the Energy Select Sector SPDR (NYSE: XLE) rose 43 cents to $56.13. 

December gold gained $8.40 closing at $1,195.90 an ounce, and the PHLX Gold/Silver Sector Index (NASDAQ: XAU) closed at 173.91, up 3.66 points.

What the Markets Are Saying

On the basis of performance, the Dow Jones Industrial Average has outrun the other indices by a wide margin. Yesterday was the ninth day that it has held above its 200-day moving average. The others have held above it for three days. None has yet to rise above January’s left shoulder of the potential head-and-shoulders top. All are grossly overbought according to the internal indicators, and the exchanges continue to receive extremely low volume.

Despite the low volume and the disbelief that the market can move higher, it continues to inch upward each day. On a pullback, the first line of support is the 200-day moving average. For the Dow that is 10,421, for the S&P 500 it is 1,115, and for the Nasdaq it is at 2,265.

Even though the long-term trend of the market is down, there is enough evidence to indicate that the bulls are in charge for the near term.

For the trader, that means going long on pullbacks. But those who trade stocks for a living know that if you take positions that are against the overall trend, you can take a beating in a very quick correction. That’s why traders must protect each position with a stop-loss order — especially when going short. A mistake with a short sale can leave the unaware trader at risk for an indefinite time with a potential infinite loss. Play it smart and use stops.

Today’s Trading Landscape

Earnings to be reported before the opening include: Aecom Technology, AerCap, Alliant Energy, Alliant Techsystems, Ameren, ANSYS, Ares Capital, Auxilium Pharmaceuticals, Avista, Beacon Roofing Supply, Beazer Homes, BioCryst Pharmaceuticals, Biovail, BlueLinx, Cablevision, Canadian Natural Resources, Cardinal Health, Carrizo Oil & Gas, CBOE Holdings, China Information Security Technology, Church & Dwight, Ciber, CIGNA, Cinemark, Cogent Communications, Consolidated Communications, Cooper Tire, Cornerstone Therapeutics, Delek US Holdings, Denbury Resources, Diana Shipping, DirecTV, Edison, Encore Energy, EnergySolutions, ENGlobal, EnPro Industries, Ethan Allen, Exterran Holdings, Fortress Investment, Foster Wheeler, FreeSeas, FreightCar America, Frontier Oil, Fuel Systems Solutions, Genesis Energy, L.P., GeoResources, Gerdau AmeriSteel, GP Strategies, H&E Equipment Services, Hawk Corp., Hewitt Associates, HHGregg, Holly, Huntsman, Hyatt Hotels, IdaCorp., Incyte, Infinity Property & Casualty, Inspire Pharmaceuticals, International Flavors, Koppers Holdings, K-Swiss, Kulicke & Soffa, Lamar Advertising, Lincoln Educational Services, Littelfuse, Liz Claiborne, Maximus, MCG Capital, Medical Properties Trust, Medifast, MetaliCo., MetroPCS, MF Global, Micromet, Mobile Mini, Multi-Color, Natural Gas Services, Northstar Realty, OM Group, Omega HealthCare, Omnicare, Optimer Pharma, Orbitz, Orion Marine, Parker Drilling, PC Mall, Perficient, PetroQuest Energy, Pioneer Drilling, Plains Exploration, Playboy, Portland General Electric, PPL Corp., Prestige Brands, RBC Bearings, Rofin-Sinar Technologies, Smart Balance, Smith & Nephew, South Jersey Industries, Southern Union, Spectra Energy LP, St. Joe Company, Suburban Propane, Swift Energy, SXC Health Solutions, Symmetry Medical, Targa Resources, TECO Energy, TEKELEC, Telephone & Data, Teradata, TETRA Technologies, TICC Capital, Tidewater, Time Warner Cable, TreeHouse Foods, Tsakos Energy, U.S. Physical Therapy, US Cellular, Viacom, Watson Pharmaceuticals, Western Refining, World Wrestling and Zebra Technologies.

Earnings to be reported after the close include: Activision Blizzard, Addus HomeCare, Air Methods, Alkermes, Allied World Assurance, Alon USA Energy, American Public Education, Assured Guaranty, Big 5 Sporting Goods, Black Hills Corp., Blue Nile, Calamos Asset, California Pizza, Callon Petroleum, Cbeyond Communications, CEC Entertainment, CF Industries, Codexis, Cogent, Cogo Group, Coleman Cable, Conceptus, Copano Energy, Crocs, DCP Midstream, DCT Industrial Trust, DealerTrack, DepoMed, Diodes, Dolan Media, Eclipsys, Einstein Noah, Emdeon, Emergent BioSolutions, Emulex, Energy Recovery, EOG Resources, Exelixis, FBL Financial, FEI, Global Defense Technology & Systems, Great Plains Energy, Hansen Natural, Harman, Hoku Scientific, Home Properties, ICF International, InnerWorkings, Kodiak Oil & Gas, Kraft Foods, Limelight Networks, Live Nation, Luminex, Marchex, Medicis, Microchip Technology, Mid-America Apartment, Mohawk, Move, MTS Systems, Multi-Fineline, NABI Biopharmaceuticals, Nanometrics, National Fuel Gas, NetSuite, NIC, Nighthawk Radiology, Ntelos Holdings, Obagi Medical, Online Resources, Openwave, OPNET, Opnext, PerkinElmer, PharMerica, PowerSecure, Pros Holdings, Public Storage, Radiant Systems, Res-Care, ResMed, Rosetta Stone, Rubicon Technology, Sapient, Scientific Games, Select Medical, Sequenom, SRS Labs, SW Energy, The Knot, TTM Technologies, Universal Electronics, U-Store-It, ValueClick, Warnaco Group, Weight Watchers, Weingarten Realty and XenoPort.

Economic reports due: chain store sales, Monster Employment Index, jobless claims (the consensus expects 455,000), EIA natural gas report, Treasury STRIPS, Fed balance sheet and money supply.

If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.

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