Yesterday, the Dow Jones Industrial Average had another triple-digit advance — gapping up on the opening due to AT&T’s (NYSE: T) purchase of T-Mobile USA from Deutsche Telekom (NYSE: DT). But oil closed above $102 as the conflict in Libya continued, and unrest in many Middle East nations caused concern.

Daily Stock Market News

Dow: +178 points at 12,037
S&P 500: +19.18 points at 1,298
Nasdaq: +48 points at 2,692

Volume and Breadth

NYSE: 1 billion shares traded; advancers ahead 3.9-to-1
Nasdaq: 484 million shares traded; advancers ahead 2.6-to-1

Futures and Related ETFs

April Crude Oil: +$1.26 at $102.33 per barrel; Energy Select Sector SPDR (NYSE: XLE) +$2.29 at $77.68

April Gold: +$10.30 at $1,426.20 per ounce; PHLX Gold/Silver Sector Index (NASDAQ: XAU) +4.3 points at 208.6

What the Markets Are Saying

Three successive days of gains have quickly brought the major indices to the resistance zones outlined in Thursday’s Daily Market Outlook, saying that the first line of resistance was at Dow 11,875, S&P 1,270, and Nasdaq 2,680 to 2,700. And that the next resistance layer was at Dow 11,980 to 12,000, S&P 1,290 to 1,300, and Nasdaq 2,705 to 2,760.

So far, the Dow is the only index to penetrate both resistance areas. The S&P 500 has penetrated the first line at 1,270, but failed to close above the second at 1,300. The Nasdaq has failed to penetrate either the first or second lines of resistance.

This illustrates that investors are cautious, buying mostly higher quality stocks rather than the more speculative, high p/e ratio tech stocks that drive the Nasdaq. This is not necessarily a bad sign since many upward moves start with the quality stocks. But despite the emphasis on purchasing quality, it seems that institutions are not buying much of anything, as volume again fell — this time to just 1 billion shares on the NYSE.

There is a curious similarity in the buying patterns of the last three sessions that requires our study: Each day started with a significant gap up that resulted from a positive news item, but the remainder of each day was spent drifting lower. Those who follow the “minute bars” will recognize the “flag patterns” for each day. This strange behavior appears to be caused by institutional buying on the opening but little follow-through after that. 

And here is another curiosity: The Dow closed above its 50-day moving average, but the S&P 500 has failed to do so. And the Nasdaq is over 50 points away from its 50-day moving average. 

Conclusion: The big movers of stocks are being very cautious, and the public has yet to enter stocks with strong conviction. The failure of the S&P 500 and Nasdaq to confirm the penetration of their 50-day moving averages is a non-confirmation of a turnaround. So it is prudent to remain on the defensive until both the S&P 500 and Nasdaq join the Dow in confirming that the intermediate trend has turned north.

For one ETF that appears to have turned bullish again, 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.