The Dow industrials barely missed their seventh straight loss yesterday as prices eroded in the last hour of trading and were even negative in the last minute until one programmed series of trades saved the day. European exchanges were slightly higher in anticipation that Greek officials could form a coalition government.
Claims for unemployment benefits fell slightly. Company earnings were mixed, but technology stocks were hurt by a big miss in earnings by Cisco (NASDAQ:CSCO), announced after the close on Wednesday.
The Dow Jones Industrial Average rose 20 points to 12,855, the S&P 500 gained 3 points to 1,358, and the Nasdaq fell 1 point at 2,934. The NYSE traded 784 million shares and the Nasdaq crossed 510 million. Advancers led decliners by about 1.5-to-1 on both exchanges.
With little support from some key tech stocks, the Nasdaq appears to be in a difficult technical situation. A series of pronounced lower highs and lows has formed a bear channel with support at 2,900.
The bulls are hoping that the extent of the support, which takes in all of February, could be enough to stop the index from further erosion, and so far they have held the line twice.
The stochastic hit its oversold line yesterday, for the first time since April, when the index bounced on a gap. And maybe we’ll see a repeat of that action, but a string of poor earnings from key stocks is putting pressure on the index that was absent in April.
In a panic of buying, the U.S. dollar, via the PowerShares DB US Dollar Index Bullish Fund (NYSE:UUP) has popped through the resistance line of a wedge that began to develop early in January. This jump from the support of a double-bottom is the result of European contagion fear and could come to a halt if the politicians in Greece and elsewhere can reach an agreement. But if the trend continues, a stronger dollar could drive the stock market and commodities much lower.
Conclusion: Some analysts are pointing out that the internal and sentiment indicators are now very oversold and that a reversal up is most likely. And it is true that the AAII numbers show the highest bearish sentiment since October 2011. And another contra-indicator, the letter writers, are bearish as well.
Perhaps they are all correct and a reversal is just around the corner. Until the tape action changes, however, and hard evidence of a reversal occurs, the wise trader will either stay away or opt for the short side of the market, since “trend takes precedence” and the trend is down for the short and intermediate term.
Today, we should focus on the impact of an unexpected trading loss of $2 billion at JPMorgan (NYSE:JPM). If the market can sustain this blow, the chances of a turnaround would strengthen.
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.
