China announced an increase to its spending plan and the world markets rallied, including those in the United States. Higher prices followed five days of selling and focused on some of the big blue chips like Caterpillar (CAT), up 13%, and Alcoa (AA), up 13%.
The oils did well Wednesday, with Exxon Mobil (XOM) up more than 2% and Chevron (CVX) up 3%. Apache (APA) rose 7% and Occidental Petroleum (OXY) rose 8.3%.
But a bigger Dow (DJI) advance was thwarted by General Electric’s (GE) dash to new lows. GE may lose its AAA rating and investors drove the stock almost 20% lower in anticipation of the downgrade. After assurances by management that it had a strong capital position, the stock rallied from its low and closed down only 4.6%. Despite the statements from GE, worries have increased that the company can retain its rating.
Big Lots (BIG) and BJ’s Wholesale (BJ) reported better-than-expected earnings. And Google’s (GOOG) CEO bemoaned the state of the economy and said that Google was not immune to its impact. The stock closed lower by 2.02%.
At the close, the Dow Jones Industrial Average (DJI) had gained 150 points to 6,876, the S&P 500 (SPX) rose 17 points to 713, and the Nasdaq (NASD) was up 33 points to 1,354.
The New York Stock Exchange traded 1.8 billion shares, with advancers ahead of decliners by 6-to-1. The Nasdaq crossed 900 million shares by over 2-to-1.
The April crude oil contract gained $3.73 to $45.38 a barrel, and the Amex Energy SPDR (XLE) closed at $40.14, up $1.83.
Gold futures fell again. It was the eighth-straight loss for gold, and the April contract ended the day at $906.70, off $6.90. The PHLX Gold/Silver Index (XAU) gained 2 cents, closing at $113.48.
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What the Markets Are Saying
With the market breaking to new lows last week, the market ended the worst six months of trading since 1932. But even with the Dow (DJI) and the broader-based indices down more than 50%, there appears to be no bottom yet in sight for the major indices.
Some technicians are calling for at least a modest reflex rally, and that certainly is overdue. Perhaps we even saw the beginning of it yesterday.
But don’t count on making money on reflex rallies unless you’re almost perfect at picking tops and bottoms — and I know of few traders who can consistently perform that bit of magic.
Instead, picking tops of rallies and buying one of the contra Exchange-Traded Funds (ETFs) is an easier game on the heart and can add girth to your account. Here are some overhead resistance areas to help you decide at what levels to jump on your ETF of choice.
The first resistance for the Dow Industrials (DJI) is at 6,950 and extends into the pocket of trades at 7,100 to 7,400. For the S&P 500 (SPX), that resistance starts at 740 and tops at around 780. But the breakdown from 743 is so recent it allows little time to form a meaningful zone of resistance. Thus the current rally could reverse this week, plunging stocks to new lows.
The volatility indices, the CBOE Volatility Index (VIX) and the CBOE Nasdaq Volatility Index (VXN), give scant support to the notion of a meaningful rally, since they show a remarkable level of complacency — not what we would like to see in a sharply down-trending market making new lows almost daily.
There are no signs of a market bottom or high enough volume on the last sell-off to signal a capitulation. The only advice to investors is to sell into a rally and take short positions or contra ETFs, both of which should offset your losses in this now ‘Old Big Bad Bear.’
Today’s Trading Landscape
Earnings of note to be reported include: 21st Century Holding, 3D Systems, Alaska Communications Systems Group, Alliance HealthCare Services, AmBev-Companhia de Bebidas Das Americas, Analogic Corp, Anika Therapeutics and Artesian Resources.
B&G Foods, Babcock & Brown Air Ltd, Biocompatibles Int’l plc, Bio-Reference Laboratories, Braskem S.A., Cedar Shopping Centers, China Security & Surveillance Tech, Ciena Corp, Clean Energy Fuels Corp, Clearwire Corp and Cornell Companies.
Dialysis Corp of America, Dune Energy, Emergent Biosolutions, Eurand N.V., FairPoint Communications, Fuel Systems Solutions, Fuel Tech, Gasco Energy, Genesco, Gerber Scientific, GTSI Corp, Gulf Island Fabrication and Gushan Environmental Energy Ltd.
Harvest Natural Resources, Hiland Partners LP, Home Inns & Hotels Management, I.D. Systems, Icahn Enterprises L.P., Insulet Corp, Intrepid Potash, INX, K-Swiss and Lincoln Educational Services.
Mac-Gray Corp, Marvell Technology Group Ltd, Mastech Holdings, Midas, Mocon, National Cinemedia, Noven Pharmaceuticals, Obagi Medical Products, On2 Technologies, Optelecom-NKF, Orion Marine Group, RAE Systems and RHI Entertainment.
Shenandoah Telecommunications, Smith Micro Software, Spark Networks plc, Specialty Underwriters’ Alliance, Steinway Musical Instruments, SXC Health Solutions, Tele Norte Celular Participacoes S.A., Telemar, Teton Energy Corp, The Cooper Companies, and Trans World Entertainment Corp.
U.S. Physical Therapy, Union Drilling, Urban Outfitters, Vanguard Natural Resources LLC, Venoco, Verso Paper, West Marine, Western Refining, Wind River Systems, and Winthrop Realty Trust.
Several economic reports are due today including: initial jobless claims for the week ending Feb. 28 (the consensus expects a 17,000 drop), revised Q4 productivity (the consensus expects 0.8%), revised Q4 unit labor costs (the consensus expects 4.7%), January factory orders (the consensus expects a 3.0% decrease), DJ-BTMU Business Barometer for Feb. 21, and the EIA Natural Gas Inventories for Feb. 27.
General Motors (GM) filed a delayed 10K form, and its auditors also said that there is a doubt that the automaker can continue as a going concern.
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