Sam Collins

Is the Market Tiring?

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Stocks overcame a shaky opening yesterday with the Dow Jones Industrial Average (DJI) falling almost 50 points by mid-morning. Weakness was attributed to a bounce in the U.S. dollar, along with some disappointing economic reports. Industrial production, wholesale inflation, lower retail sales and poor sentiment from homebuilders all contributed to the malaise.

The dollar rebounded early, but then gave back a good portion of the gains, and the market responded by taking back all of the losses and closing with a small plus.

Home Depot (HD) met earnings forecasts for Q3, then reduced estimates for Q4, but TJX Companies (TJX), Saks (SKS) and Pacific Sunwear (PSUN) all reported higher-than-expected earnings. Nevertheless, retailers still fell 1.4%. 

By mid-afternoon, stocks were slightly positive, but then bounced back and forth until a modest rally in the last hour resulted in the small advance, and each of the major indices was able to make a new 2009 closing high. 

Ford (F) stood out yesterday as the big winner, closeing at $8.98, up 3.10%.

At the close, the Dow was up 30 points to 10,437, the S&P 500 (SPX) gained a point to 1,110, and the Nasdaq (NASD) rose 6 points to 2,204. 

With just 972 million shares trading on the NYSE, Chris Wolf, of Cogo Wolf Asset Management, was quoted by the Wall Street Journal saying, "When the volumes are this light, even though the prices are up, you feel like you are standing on a snow bridge in the spring."

On the NYSE, decliners were ahead of advancers by a margin of 16-to-13. Nasdaq traded 597 million shares with advancers ahead of decliners by 10-to-7.

December crude oil rose 24 cents to $79.14 a barrel, and the Energy Select Sector SPDR (XLE) closed at $58.67, off 10 cents.

Gold continued to move higher with the December contract up 20 cents to $1,139.40 an ounce. The PHLX Gold/Silver Index (XAU) rose $1.13, closing at $187.40.

What the Markets Are Saying

An article in yesterday's Wall Street Journal, titled "Divergence Is a Troubling Sign for Rally," discussed one of the early signs of a market that could be turning. As pointed out in the article, "In a robust rally, everything rises in tandem -- small caps, blue chips, etc. -- but when an unsound rally peaks, certain components start to diverge. That happened several weeks ago when small-cap stocks, which have led the March rally by a wide margin, started to sputter and large-caps took over leadership."