Yesterday, stocks regained a portion of the losses of the past two weeks with a triple-digit bounce in the Dow Jones Industrial Average, which gained 1.4%. But the Nasdaq, up 0.73%, lagged compared to the gains of the Dow and the S&P 500, as concerns over the supply of technology parts made in Japan worried investors.
Daily Stock Market News
Dow: +161 points at 11,775
S&P 500: +17 points at 1,274
Nasdaq: +19 points at 2,636
Volume and Breadth
NYSE: 1 billion shares traded; advancers ahead 2.7-to-1
Nasdaq: 549 million shares traded; advancers ahead 1.6-to-1
Futures and Related ETFs
April Crude Oil: +$3.44 at $101.42 per barrel; Energy Select Sector SPDR (NYSE: XLE) +$2.25 at $76
April Gold: +$8.10 at $1,404.20 per ounce; PHLX Gold/Silver Sector Index (NASDAQ: XAU) +2.47 points at 202.04
What the Markets Are Saying
Earlier this week, the support for the major indices focused on a descending triangle with a support line that connected the lows of January and February. For the Nasdaq, that support line was at 2,700. But, as expected, that minor support held for just a day, and the focus shifted to the major support at the December breakout levels.
On Thursday, the Daily Market Outlook said, “These [December breakout] numbers not only resulted in a major upside break, but act as a major support line in the event of a significant reversal. The breakout support line is 11,600 for the Dow, 1,250 for the S&P 500, and 2,625 for the Nasdaq.”
We got the breakdown this week, and so the December support lines become extremely important since a violation would almost certainly lead to an attack on the 200-day moving average and the long-term trend, which is still up.
Yesterday’s rally, which resulted in a triple-digit gain for the Dow, at first glance looks impressive. But the response from the Nasdaq was weak and gives a different perspective: The former leader did not do well yesterday, with volume again only a fraction of the days when stocks declined, so it looks more like short-covering than new institutional interest.
Several weeks ago, each major index suffered a setback just as they were going to break to new high ground. But as a result of the dramatic change in direction, there is much work to be done before investors will view new high numbers again. Resistance to rallies has several layers starting at Dow 11,875, S&P 1,270, and Nasdaq 2,680 to 2,700. The next resistance layer is at Dow 11,980 to 12,000, S&P 1,290 to 1,300, and Nasdaq 2,705 to 2,760.
Since the near- and intermediate-term direction of stocks is down, we should continue to sell into rallies and gather cash or short stocks until a significant correction has run its course. Many investors are disappointed that the market has run away from them. It may not be long before they will get a second chance to buy stocks at more acceptable levels.
For one stock to short now, see the Trade of the Day.
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.
