The economy took center stage again yesterday, with two important reports: jobless claims and existing home sales. Stocks opened higher on news that the latest jobless claims number fell to its lowest level in two months. But when data was published that showed a drop in existing home sales, stocks fell to their lowest levels in more than a week.
Financial stocks took a big hit, off 1.8%. And REITs were among the worst performers as profit-taking took back the gains made early this week.
However, the U.S. dollar staged one of the strongest rallies this year — advancing the Dollar Index more than 1%. And that meant that commodities, especially gold and oil, took a pounding. Gold fell 1.53% and crude oil was off 4.4%.
At the close, the Dow Jones Industrial Average (DJI) was off 41 points to 9,707, the S&P 500 (SPX) fell 10 points to 1,051, and the Nasdaq (NASD) was down 24 points to 2,108.
Volume on the NYSE totaled 1.4 billion shares, while 759 million shares traded on the Nasdaq, with decliners ahead of advancers by more than 3-to-1 on both exchanges.
Crude oil for November delivery fell to a nine-week low, closing at $65.89 a barrel, off $3.62. The Energy Select Sector SPDR (XLE) was off 78 cents at $53.63.
December gold fell $15.50 to $998.90. It was the first time in two weeks that gold closed under $1,000 an ounce. The PHLX Gold/Silver Index (XAU) closed at $160.84, down $3.75. But the trend is still up for gold, and the recent profit-taking will probably be contained above $150 on the XAU.
What the Markets Are Saying
Even though volume on the NYSE picked up slightly on yesterday’s selling and breadth was at a negative 3-to-1, steady buying in the blue chips kept the pullback in check.
>
A minor adjustment is also under way on the S&P 500. But the S&P’s intraday low was halted 5 points above the first support line, the 20-day moving average at 1,040. The second support zone begins at 1,010, which also happens to be where the 50-day moving average now rests.
The Relative Strength Index (RSI) fell from last Thursday’s reading of 70.15, which is considered very overbought, to 57.84 (slightly overbought) — that’s a quick adjustment and a sign that a turnaround could be just as swift.
So, with support zones very near and internal indicators relatively stable, be prepared to put some cash to work. Trading is still within the shallow zone of resistance, and that means that a recovery to new highs could happen in a flash.
Today’s Trading Landscape
Earnings to be reported include: AZZ Inc. (AZZ) and KB Home (KBH).
Economic reports due: durable goods orders (the consensus expects 1%), consumer sentiment (the consensus expects 70.2), and new home sales (the consensus expects 445,000).
Late news: Research In Motion (RIMM) fell sharply in after-hours trading following a lower-than-expected Q2 EPS of $1.03 and a projection by the company of $1 to $1.08 for Q3.
The old ways of investing don’t work anymore. But trading options founded on scientific principle can and does work in volatile times like these. Learn how to leverage the power of technical analysis to identify the short window when a trade is set to go straight up or down. Get your FREE copy here!
