Following the State of the Union message and results from the Fed, it was reasonable to expect a reactive bounce yesterday. But while it’s true that the president’s proposals will result in months of haggling to hammer out a compromise, the Fed’s action of no immediate rate increases and a continuation of its $600 billion debt purchase plan should have created some optimism.
Daily Stock Market News
Dow: +8 at 11,985
S&P 500: +5 at 1,297
Nasdaq: +20 at 2,740
Volume
NYSE: 1.2 billion; advancers ahead 2.3-to-1
Nasdaq: 534 million; decliners ahead 3.1-to-1
Futures and Related ETFs
March Crude Oil: +$1.14 at $87.33; Energy Select Sector SPDR (NYSE: XLE) +$1.68 at $71.84
February Gold: +$0.70 settled at $1,333; PHLX Gold/Silver Sector Index (NASDAQ: XAU) +7.21 points at 204.04
What the Markets are Saying
Instead of a solid rally on heavy volume, all we got was a meek attack on the Dow’s 12,000 line and a feint by the S&P against the 1,300 level. Both were accompanied by slight increases in volume and better breadth numbers as they hit new intraday highs. The Dow had an intraday penetration to 12,020, but the S&P turned back after getting to within 0.26 of hitting 1,300 and closed at the now familiar 1,296 area (highs of Jan. 17and 18.)
Since our readers are much aware of my current opinion on the stock market (overbought and due for a correction), I’d like to address the many e-mails I’ve received on gold and silver: Precious metals rallied yesterday following the Fed’s assurance of more debt purchases. And silver was the biggest winner with the Global X Silver Miners ETF (NYSE: SIL) up 6.17% and iShares Silver Trust (NYSE: SLV) gaining 2.52%.
Gold stocks were also among the top performers of the day. But both the SPDR Gold Shares (NYSE: GLD) and the PowerShares DB US Dollar Index Bullish Fund (NYSE: UUP) recently broke to two-month lows with both piercing their 50-day moving averages — as pointed out yesterday by Michael Ashbaugh (MarketWatch) who recommends holding back on purchases of GLD despite being oversold near term and due for a bounce. He notes that further technical repairs are needed and a drive below the October low could result in a further fall to $126.
Everyone has an opinion on gold, and two very well-known technicians have differing opinions on the popular commodity. Richard Russell of Dow Theory Letters is bullish saying, “The beauty of gold is that it’s international and beholden to no one.” While Joe Granville, in The Granville Letter, says, “Correct technical analysis leads us to not want something when everybody wants it and to be attracted to it when nobody wants it. Crowds love GOLD and crowds are drawn to buy [gold] STOCKS as flies are attracted to flypaper with the greatest attraction and public euphoria in recorded history.” (Both of these quotations were published in Investors Intelligence.)
See the Trade of the Day for my opinion on gold.
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.
If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.
