On Friday the Dow closed higher for the sixth gain in seven sessions as a result of an upward revision of Q4 GDP in the morning. But from noon to the closing bell, stocks sagged from profit taking and a University of Michigan consumer-sentiment number that fell below analysts’ estimates. So what’s in store for this week?
Daily Stock Market News
- Dow Jones: +50 at 12,221
- S&P 500: +4 at 1,314
- Nasdaq: +7 at 2,743
Volume & Breadth
- NYSE: 824 million, advancers ahead 1.8-to-1
- Nasdaq: 500 million, advancers ahead 1.4-to-1
Futures & Related ETFs
- May Crude Oil: -$0.20 at $105.40; Energy Select Sector SPDR (NYSE: XLE) +$0.70 at $78.90
- April Gold: -$8.70, settled at $1,426.20; PHLX Gold/Silver Sector Index (NASDAQ: XAU) -$1.11 at $214.66
What The Markets Are Saying
The pop of 665 DJIA points from the lows of March 16 has put the bulls in charge again. All of the major indices have participated in the rush to buy with the Dow, the S&P 500, and Nasdaq breaking above their intermediate resistance lines. And the Russell 3000, which covers about 98% of all U.S. stocks, closed above its 20-day and 50-day moving averages as well.
So will the rally continue?
The CBOE Volatility Index (CBOE: VIX), or “fear gauge,” fell for the seventh consecutive day to 17.91 from a high of 31.28 for the biggest decline in its history—down 45%. But the Wall Street Journal cited statistical evidence from VelocityShares that the VIX may quickly “snap back.” “On occasion where the VIX fell more than 30%, the index has snapped back by an average of 17% over an average of two trading days.” And one trader said, “People are taking the bad scenarios they were protecting against off the table.”
This may seem like “too much, too soon” driven by low volume and weak market breadth. However, Michael Ashbaugh of MarketWatch points out, “Conversely, market bulls will argue that the previous uptrend—before the Libya turmoil and Japan’s nuclear crisis—was equally unimpressive. But despite the prior uptrend’s limitations, the markets pressed steadily higher. Against this backdrop, the previously plodding, unimpressive uptrend gets the benefit of the doubt.”
Most impressive has been the chart action with a very pronounced “V” bottom. And Mark Arbeter of S&P says, “We believe this sets the stock market up for a run to new recovery highs, with the indices forecasted to peak in April or May.”
Our internal indicators have flashed short-term buy signals. And the most watched of the indicators, MACD, flashed a strong short-term buy on Thursday.
Conclusion: With NYSE volume very low and breadth unsupportive of a major breakout, it is possible that the stocks could test the highs of early March without breaking the February highs. But with the first quarter of the year ending on Thursday and some institutional portfolio rebalancing likely, the trend for this week favors the bulls.
Get my trade of the day on Ford stock here.
If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.
