Yesterday the stock market, as measured by the Dow 30 Components, gained for the seventh consecutive day, but it was a struggle throughout the session to maintain a positive balance. Even reports of better new home sales and a higher-than-expected durable goods number had little impact, and stocks closed only marginally higher.
Annualized sale of new homes for July hit 433,000 units, while analysts had only been looking for 390,000 units. This is the largest month-over-month increase for July since 2005, and it helped to bring down inventory to a 7.5-month supply from an 8.5-month supply.
Also, the Commerce Department reported the largest increase in durable goods since July 2007. But, as I said, even this had little impact on the market. And with so little volume, it is difficult to assess the impact of the positive numbers since the market is in the hands of traders rather than longer-term investors.
Dow stocks Caterpillar (CAT), General Electric (GE) and 3M (MMM) fell along with JPMorgan Chase (JPM). But American Express (AXP), Intel (INTC), Coca Cola (KO) and McDonald’s (MCD) all had close to or more than a 1% gain.
At the close, the Dow Jones Industrial Average (DJI) rose more than 4 points to 9,544, the S&P 500 (SPX) was slightly higher at 1,028, and the Nasdaq (NASD) gained fractionally to 2,024.
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Volume on the NYSE was barely more than 1 billion shares, and decliners slightly outnumbered advancers. On the Nasdaq the same was true, with volume at a low 590 million shares; however advancers were ahead fractionally.
October crude oil fell 62 cents to $71.43 a barrel, and the Energy Select Sector SPDR (XLE) rose 24 cents to $52.45.
December gold closed at $945.80 an ounce, off 20 cents, and the PHLX Gold/Silver Index (XAU) fell $1.87 to $145.07.
What the Markets Are Saying
Despite the seven-day run of the Dow, what we have seen following the “breakout” of last Friday is anything but inspiring. While the economic news has been unrelenting in its higher-than-expected reports, the market has yawned. And this is not good.
Volume has again declined to sub-normal levels, and market breadth, it seems, can do no more than break even. Perhaps it’s just that it’s the end of the summer and the real movers and shakers are on vacation. But when there is this much good news with so little buying, my experience tells me to head for the hills because a correction is about to engulf us.
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In fact, it now appears all but certain that the S&P 500 is rolling over and heading for the first support at 1,005 to 1,010, and could even fall to the major support zone at 945 to 950.
But if it does, put more money to work since corrections in bull markets are just what we need to add to our partial positions or enter stocks that have the potential to double and triple from prices just under yesterday’s closes.
Today’s Trading Landscape
Earnings to be reported include: American Eagle Outfitters, Aruba Networks, Bebe Stores, Brown-Forman Corp., China Sunergy Co. Ltd., Conn’s, Cost Plus, Credit Agricole SA, Dell, Energy Conversion Devices, Fred’s, Genesco, H&R Block, Marvell Technology Group Ltd., Micros Systems, Netezza Corp., Novell, OmniVision Technologies, Quanex Building Products Corp., Royal Bank of Canada, Solera Holdings, SourceForge, The9 Ltd., Toll Brothers, Toronto-Dominion Bank and Zale Corp.
Economic reports due: GDP (the consensus expects -1.5%), jobless claims (the consensus expects 565 K), DJ-BTMU U.S. Business Barometer, EIA natural gas inventories, Kansas City Fed Manufacturing Survey and money supply.
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