On Friday, the Dow Jones Industrials rose 0.12%, and the S&P 500 gained 0.08% on a day of increased volume due to the expiration of four series of options know as a quadruple witching day. But while the senior indices had only modest gains, the Nasdaq rose 0.54% due to better-than-expected earnings from Research In Motion Limited (NASDAQ: RIMM) and Oracle Corporation (NASDAQ: ORCL), and a dividend increase and share buyback by Texas Instruments Inc. (NYSE: TXN).
The Dow and the S&P 500 were held back by weakness in financial and energy stocks. Both sectors fell .05%. Bank of America Corporation (NYSE: BAC) fell 1.1%, JPMorgan Chase & Co. (NYSE: JPM) was off 2.3%, and Morgan Stanley (NYSE: MS) was down 1.2%. Massey Energy Company (NYSE: MEE) fell sharply following the company’s report that Q3 production was lower than expected and operating costs were higher than expected.
Uncertain economic news brought about a mixed market, and for most of the day, the broad-based indices traded just over or under Thursday’s close. Treasuries have remained strong with the benchmark 10-year note falling to a yield of 2.746%.
On Friday, the Dow Jones Industrial Average rose 13 points to 10,608, the S&P 500 rose under a point, closing at 1,126, and the Nasdaq gained 12 points, closing at 2,316.
The NYSE traded 1.8 billion shares with advancers ahead of decliners by almost 1.5-to-1. The Nasdaq crossed 949 million shares and advancers there ahead by 1.4-to-1.
For the week, the Dow gained 1.4%, the S&P 500 rose 1.4%, and the Nasdaq gained 3.3%.
Crude oil prices fell for the fourth consecutive day on Friday, with the October delivery down 91 cents to $73.66 a barrel. The Energy Select Sector SPDR (NYSE: XLE) fell 52 cents to $53.89.
December gold extended its recent run higher by gaining $3.70 to settle at a record high of $1,277.50 an ounce. The PHLX Gold/Silver Sector Index (NASDAQ: XAU) fell 1.15 points, closing at 191.68 on modest profit-taking.
What the Markets Are Saying
The case for a further breakout strengthened Monday, Sept. 13, when the major indices closed above their respective 200-day moving averages and then held the position for the entire week. So some of the more bullish services and technicians jumped on this event as evidence that stocks would now be heading higher. But they seem to be ignoring the fact that on two other occasions this year, in June and August, the bulls managed to close over the 200-day only to be held a bay for a week or more, and then got pounded back to the lows of the year.
I believe that Mark Arbeter, S&P’s technical guru, has it right when he says, “On the daily chart , the S&P 500 need to break strongly (1%+) above the June and August closing high and intraday high in the 1,128 to 1,131 [area] to complete the inverse H&S [head-and-shoulders] formation.”
Even the Nasdaq, the strongest of the indices, with its recent break above the August high, has yet to exceed the July high by the required 1%, although it has breached the highest close by 5.81 points. But it has not yet exceeded the June 21 high of 2,341.11.
Meanwhile, our internal indicators, chiefly the slow stochastic and Moving Average Convergence/Divergence (MACD), have issued sell signals. And the sentiment indicators are strongly bullish and, thus, not encouraging for the bulls since they are reverse indicators.
But there is no question that the bulls have pushed the market to the brink of a breakout. On Friday, the intraday high for the S&P 500 was 1,131.47, matching the high of June, and they did it on higher volume. But volume is typically high on a multiple options expiration day and had been puny prior to Friday. The bulls will have to do better than the sub-1 billion-share days that have been recorded on the NYSE for over two weeks if they are to make a breakout stick.
The major indices are still range-bound, and unless some heavy hitters emerge this week, the chances are strong that we will see a replay of the June and August failures.
Get one stock that is breaking down here.
Today’s Trading Landscape
Earnings to be reported before the opening include: Discover Financial Services and Lennar.
Economic report due: housing market index.
If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.
The ‘Off the Charts’ Options Trading Secret — In this just-released guide to chart analysis, you’ll discover which chart patterns are the most reliable, how to avoid “sucker charts,” the characteristics of a true breakout, how to know when the big-money insiders are making a move, and more! Plus, two current trades to get you started. Get your FREE copy here.
