Following a weak opening yesterday, the Dow Jones Industrial Average (DJI) again posted a gain, making it eight in a row. In the afternoon, the Treasury’s auction for its seven-year bond received enough acceptance to trigger a late stock rally.
However, most of the day was spent in the red and little attention was given to the economic data, even though it was positive. The preliminary Q2 GDP reports showed a better-than-expected 1% annualized decline, and consumer spending during Q2 also was higher than expected — contracting at just 1% versus an expected decline of 1.2%. And jobless claims came in close to expectations.
The market began to respond when Boeing (BA) said that its 787 Dreamliner is expected to be delivered in late 2010. But the real buying came as a result of the Treasury auction. American Express (AXP) rose 2.6%, Travelers (TRV) gained 0.8%, and AIG (AIG) ran the short sellers, gaining a whopping 26.93%.
At the close, the Dow was up 37 points to 9,581, the S&P 500 (SPX) rose 3 points to 1,031, and the Nasdaq (NASD) gained points to 2,028.
The NYSE traded 1.2 billion shares with advancers ahead of decliners by just 8-to-7. The Nasdaq traded 630 million shares with decliners ahead of advancers by a slight margin.
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October crude oil rose to $72.49 a barrel, up $1.06, and the Energy Select Sector SPDR (XLE) fell 16 cents to $52.29.
Gold for December delivery rose $1.50 to $947.30 an ounce, and the PHLX Gold/Silver Index (XAU) gained $2.73, closing at $147.80.
What the Markets Are Saying
Just as it appeared that a full-scale retreat was about to get under way, the Dow rallied, responding to the seven-year auction and good news from Boeing. But it’s not the Dow that is in focus; rather it’s the Nasdaq.
For the first time since April, the Nasdaq is falling away from a major bull market resistance line that connects the May, June and August highs. And, while it could still pick up momentum, that indicator is also lagging the other two indices and is on the verge of going negative.
Initial support starts at the low of 1,925 and ends at the 50-day moving average, now at around 1,910. But the real support to a major retreat is the broad trading zone of 1,770 to 1,880.
If we get the pullback now, or very soon, the first support for the S&P 500 is the 980 to 1,010 zone, which is the trading zone of July 31 to Aug. 17. The second and strongest zone is from 940 to 960, and begins at the current level of the 50-day moving average and extends to the top of the early June tops.
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The first zone of support for the Dow is 9,130 to 9,400. The primary support zone is 8,700 to 8,900 with the 50-day moving average now at 8,895.
Momentum for all of the indices is now lagging, and it seems that in just a short time a correction will begin.
Today’s Trading Landscape
Earnings to be reported include: Bank of Nova Scotia (BNS), Frontline Ltd. (FRO), Golar LNG Ltd. (GLNG), Lukoil Holdings (LUKOY), Piedmont Natural Gas (PNY), Seadrill Ltd. and Tiffany & Co. (TIF).
Economic reports due: personal income (the consensus expects +0.1%), personal spending (the consensus expects +0.3%), and Reuters/University of Michigan consumer confidence index (the consensus expects 64).
Late news: Dell (DELL) reported Q2 earnings per share of 24 cents versus a 23-cent estimate. The company said it sees stability and that the PC industry is recovering.
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