Stocks ended last week with the Dow Industrials having risen four straight days. It was the biggest weekly gain of the year, but it followed one of the worst weeks, and on a closing basis, the net in two weeks was a gain of 99 points.
The rally on Friday was in anticipation that the eurozone would somehow manage to bail out Spain. On Sunday, that is what appears to have happened with reports that the zone’s finance ministers have agreed to lend Spain up to 100 billion euros for its banks.
On Friday, the Dow Jones Industrial Average gained 93 points, closing at 12,554, the S&P 500 rose 11 points to 1,326, and the Nasdaq gained 27 points to close at 2,858. The NYSE traded 686 million shares and the Nasdaq crossed 382 million. Advancers led decliners on the Big Board by 2.3-to-1, and advancers were ahead on the Nasdaq by 2-to-1.
Friday’s rebound, which penetrated the 20-day moving average but fell short of the resistance at 1,336, is representative of the other major indices. In order for the trends to reverse, the Dow must close over 12,716, and the Nasdaq must successfully attack the resistance zone at 2,882 to 2,885.
As noted by Sy Harding of Street Smart Report last week, the above chart of the global markets shows clearly that the 11 largest economies outside of the United States are down an average of almost 20% from their February and March peaks and 28.6% down from their peaks in the spring of 2011. And Harding points out that their rallies off of the October low were just bear-market rallies.
My opinion is that the euro chiefs’ move this weekend is just another attempt to save a deteriorating EU by “kicking the can down the road.”
Conclusion: Although each of the major indices has rallied from its low and each, by a fraction, has had its momentum turn positive, there is currently no change of trend. Sunday’s “deal” with Spain should start stocks off on a positive note this morning, but headlines alone are likely not enough to turn the market positive. Until the overhead is penetrated, the overall near to intermediate trends are still down, and so the best strategy remains to sell into rallies.
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.
