One of former President Ronald Reagan’s most-used expressions was, “Well, there they go again.” He could have been referring to a disappointment by his favorite sports team or an attack by his political opponents, but yesterday, if he were alive, he would most likely have been directing it toward the Europeans and their tortuous financial problems with Greece.
Even before the NYSE’s opening bell rung yesterday, it was a foregone conclusion that with the major European exchanges down close to 3%, the Greek market off 6.7%, and the euro in another day of decline, the U.S. market was going to feel pressure. And a pressure cooker is what it got. By the close, the stock market had seen its biggest sell-off since February.
The worst performance came from the technology sector and the tech-heavy Russell 2000 (RUT), which fell 3.15%.
Technology leader Apple (AAPL) was hit hard (off 2.9%) on reports that the antitrust folks are looking into possible violations in licensing agreements with software developers. And Google (GOOG) was hit with a 4.6% decline following a Wall Street Journal article that said it will soon offer e-books that could receive heavy competition from other tech players.
The selling in Europe and on Wall Street put additional pressure on commodities and gave strength to the U.S. dollar. The greenback closed at $1.30 versus the euro.
At the close, the Dow Jones Industrial Average (DJI) was off 225 points (-2.02%) to 10,927, the S&P 500 (SPX) fell 29 points (-2.38%) to 1,174, and the Nasdaq (NASD) was down 74 points (-2.98%) to 2,425.
The NYSE traded 1.5 billion shares with decliners over advancers by more than 5-to-1. The Nasdaq crossed 823 million shares, and decliners were ahead by almost 6-to-1.
And prices were no better in the futures pits as June crude oil fell $3.45 to $82.74 a barrel. The Energy Select Sector SPDR (XLE) fell $1.61 to $58.97.
Gold fared no better with the June contract off $14.10 to $1,169.20 an ounce. The PHLX Gold/Silver Sector Index (XAU) fell 2.18 points to 174.39.
What the Markets Are Saying
In addition to yesterday’s decline being the worst since February — with more than 95% of stocks on the S&P 500 down — volatility rose to a two-month high.
On Monday, I mentioned the VIX as an important negative indicator when it rises sharply with a wide spread between daily highs and lows. Yesterday the index rose 3.74 points to 23.84, the highest level since Feb. 12, with a warning that more selling is likely to follow.
More important, though, is the fact that the major indices have closed below their April 28 lows. Those lows marked a potential upside reversal day for the markets under our internal Collins-Bollinger Reversal (CBR) system. But when violated within five trading days (this is the fourth day), the signals reverse, and in this situation they gave strong sell signals.
Yesterday marked the third session in six that every major index has closed below its respective 20-day moving average. In addition, a major index, the broad-based NYSE Composite, failed to hold above its 50-day moving average. This alone may be taken as a strong sell signal for stocks.
And finally, if we need a “finally,” volume in each decline for the past 10 sessions has been higher on down days than up days. This tells us that institutions are most likely major sellers of stocks.
The next support level for the Dow Industrials is at its 50-day moving average at 10,821. The S&P 500’s intraday low fell to its next level of support, the 50-day moving average, at 1,168. A close by the S&P below that line leads to the next support zone at 1,153 to 1,170.
It is never too late to sell and raise cash for the next opportunity.
Today’s Trading Landscape
Earnings to be reported before the opening include: Agrium, Aircastle, Albany Molecular, Allegheny Energy, Allis-Chalmers Energy, Alpha Natural Resources, Ameren, Astronics, Atlas Air Worldwide, Babcock & Brown Air, Capital Lease Funding, CBIZ, CenterPoint, Centurytel, Ciber, Clean Harbors, Consolidated Graphics, Cooper Tire, Cott, Dawson Geophysical, Devon Energy, DG FastChannel, FMS Tech, Enbridge, ENGlobal, Foster Wheeler, FTI Consulting, Garmin, Gartner, Geo Group, InfoSpace, IntercontinentalExchange, Kenneth Cole, King Pharmaceuticals, Knology, L-1 Identity Solutions, Lance, Lincoln Educational Services, LoJack, Medifast, Micromet, Mobile Mini, Neutral Tandem, NewStar Financial, NJ Resources, NW Natural Gas, O2 Micro, Orbitz, Parker Drilling, Petrohawk Energy, PetroQuest Energy, PolyOne, Powell Industries, Progress Energy, Public Service, Pulte Homes, Quanta Services, Qwest, RR Donnelley & Sons, Sinclair Broadcast, Sirona Dental Systems, Spectra Energy LP, Speedway Motorsports, SPX Corp., Talisman Energy, Targa Resources, Textainer Group, Time Warner, Triple-S Management, TRW Automotive, Ultra Petroleum, Vishay, WABCO Holdings, WellCare Group, Williams Companies and XTO Energy.
Earnings to be reported after the close include: ADC Telecom, Advisory Board, Allos Therapeutics, Alnylam Pharmaceuticals, American Equity Investment Life, American Financial, Annaly Mortgage, Atmos Energy, BGC Partners, Blackboard, BMC Software, Boston Beer Co., Brightpoint, Career Education, Cbeyond Communications, CBS Corp., Churchill Downs, Clearwire, Cleco Corp., Cogent, Companhia Vale do Rio, Concho Resources, Continental Resources, Con-Way, Copa Holdings, Corrections Corp., Cross Country Healthcare, Dealer/Track, DexCom, Drugstore.com, Echo Global Logistics, Education Management, Emergent BioSolutions, EnerNOC, Equity One, eResearchTech, Essex Property, Excel Maritime Carriers, ExlService, Expeditors International, FARO Technologies, FBL Financial, Flowserve, Gibraltar Industries, Global Cash Access, Global Industries, GMX Resources, Goodrich Petroleum, Hain Celestial, Hansen Medical, Hill International, Himax Technologies, Hypercom, Insight Enterprises, Integrys Energy, inVentiv Health, ION Geophysical, Jazz Pharmaceuticals, JDS Uniphase, KAR Auction Services, Kendle, Kimco Realty, Kite Realty, LivePerson, MasTec, McCormick & Schmick’s Seafood Restaurants, Medcath, Molina Healthcare, Morton’s Restaurant Group, Murphy Oil, Natural Resource, NCI, NPS Pharmaceuticals, NVE Corp., ON Semiconductor, OraSure Technologies, Orient-Express Hotels, Ormat Technologies, Pacer International, Penn Virginia, Plains All American, Polypore International, ProAssurance, Pros Holdings, Protective Life, Providence Service Corp., Prudential, Quality Distribution, Quest Software, Regency Centers, S1 Corp., Savient Pharmaceuticals, Schweitzer-Mauduit, Senorx, Smith Micro Software, Standard Parking, Symantec, TeleTech, TheStreet.com, Transocean, United Online, Virage Logic, Vital Images, Western Gas Partners and WGL Holdings.
Economic reports due: MBA purchase applications, Challenger Job-Cut Report, ADP employment report, Treasury refunding announcement, ISM non-manufacturing index (the consensus expects 56.4), and EIA petroleum status report.
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