Sam Collins

Bring It On!

by Sam Collins   10/28/08

U.S. markets held for most of the day Monday after Europe and Asia were slammed for more than 10% losses. Markets started off a hundred points lower, but after investors digested the new home sales for September -- which rose 2.7% compared with economists' forecast of a decline of 2.2% -- the market rallied and by 1:30 p.m. Eastern was up 75 points.

But 10 minutes before the close, selling programs drove stocks down and, even though the decline was on low volume, the day turned into another disappointment. In addition to selling programs, lower crude prices were blamed for the decline. But when crude oil was making new highs lower, stock prices were blamed on higher crude prices -- sounds like folks need to blame something other than the normal pounding of a bear market.

General Motors (GM) fell 8.4% after Standard & Poor's reiterated its "sell" rating on the stock. But following the close, The Wall Street Journal reported that the Department of Energy is working to release $5 billion in loans to GM, a move that could help ease the way for the auto maker's merger with Chrysler.

Of the Dow's 30 stocks, 27 closed lower but Verizon (VZ) was up 10.1%. The company reported a 31% rise in Q3 profits and had the best one-day gain since March of 2000.

The telecom group was the lead performer, up 1.9%. Century Tel (CTL) gained 3.88% after announcing the acquisition of Embarq (EQ) in an all-stock deal valued at more than $11.5 billion.

The Dow Jones Industrial Average (DJI) fell 203 points to 8,176, the S&P 500 (SPX) lost 28 points, closing at 849, and the Nasdaq (NASD) fell 46 points to 1,506.

Volume was relatively light on all exchanges. The New York Stock Exchange traded 1.4 billion shares, and 973 million shares traded on the Nasdaq. Decliners led advances on both exchanges by about 4-to-1.

The December crude oil contract fell 93 cents to $63.22 a barrel -- its lowest level since May 2007 -- and the Amex Energy SPDR (XLE) dropped $2.79 to $40.86.

Gold for December delivery posted a $12.60 gain at $742.90, and the PHLX Gold/Silver Index (XAU) fell $6.50 to $64.36.

What the Markets Are Saying

It is said that the last phase of selling in a bear market is first characterized by panic -- when investors receive margin calls and stocks sink to prices beyond reason. Then when stocks fail to rally, even from the most depressed levels and continue to sink even lower, investors enter the stage of resignation.

On Monday, it seemed we may have entered that final psychological zone of resignation. Volume was low and following a mid-morning rally, for much of the day the indices meandered.

Then, just before the close, new selling programs hit the tape and down she went. Every technical indicator used by Standard & Poor's -- sentiment, momentum, and monetary -- are all bullish, yet many stocks headed to new, lower ground, adding even more to the feeling that nothing can stop the downward spiral.

But despite a new closing low for both the NYSE Composite (NYA) and the Nasdaq (NASD), the most-watched indices -- the Dow (DJI) and the S&P 500 (SPX) -- have been hovering over the Oct. 10 lows of 8,176 and 840 respectively and every indicator is pointing to a rally. Until those Oct. 10 lows are penetrated, the chances are good that a decent tradable rally could occur and even start from the current levels.

This morning, the stock futures are pointing to a much higher opening. Perhaps this is the beginning of "The Rally."

If so, don't forget that bear market rallies are fast and deceptive and can retrace up to 20% to 30% or more of the total move down from the all-time high. Putting numbers to such a rally targets the Dow at 9,500 to 10,000, and the first real resistance doesn't show until Dow 10,500.

Bring it on!

Today's Trading Landscape

Earnings to be reported include: A.M. Castle & Co (CAS), Aaron Rents (RNT), ACE Limited (ACE), Actel (ACTL), Advent Software (ADVS), American Campus Communities (ACC), Apollo Group (APOL), Arthur J. Gallagher & Co (AJG) and Ashland (ASH).

Beckman Coulter (BEC), Bemis Co (BMS), Black Box Network Services (BBOX), Boston Properties (BXP), Boyd Gaming (BYD), BP plc (BP), Buckeye Group Holdings L.P. (BGH), Buckeye Partners (BPL) and Buckeye Technologies (BKI).

CACI Int'l (CAI), Canadian Pacific Railway (CP), Capital Trust (CT), Carpenter Technology (CRS), Celera (CRA), Centene Corp (CNC), Centex Corp (CTX), Cephalon (CEPH), Ceradyne (CRDN), Check Point Software Technologies (CHKP), Chicago Bridge & Iron (CBI), China National Offshore Oil Corp (CNOOC), China Security & Surveillance Tech (CSR), Compass Minerals (CMP), Convergys Corp (CVG) and CTS Corp (CTS).

Denny's Corp (DENN), Dentsply Int'l (XRAY), Digital River (DRIV), Double-Take Software (DBTK), DreamWorks Animation SKG (DWA), EarthLink (ELNK), Edgar Online (EDGR), Encore Acquisition Co (EAC), Entergy (ETR), Entertainment Properties Trust (EPR) and Exactech (EXAC).

Fiserv (FISV), FMC Corp (FMC), Fresh Del Monte Produce (FDP), Getty Realty (GTY), Group 1 Automotive (GPI), Honda Motor Co. Ltd (HMC), Jones Lang LaSalle (JLL), Kansas City Southern (KSU), Kaydon (KDN), Key Tronic Corp (KTCC), LAN Airlines (LFL), Lincoln National (LNC), Lithia Motors (LAD) and Luxotica Group (LUX).

Manitowoc (MTW), Martha Stewart Living Omnimedia (MSO), Martin Marietta Materials (MLM), Masco (MAS), McKesson Corp (MCK), Nalco Holding Co (NLC), Network Equipment Technologies (NWK), Occidental Petroleum Corp (OXY), Panasonic Corp (PC), Patriot Coal Corp (PCX), Quaker Chemical Corp (KWR) and RSC Holdings (RRR).

SAP AG (SAP), SK Telecom (SKM), Smith Int'l (SII), Sonic Automotive (SAH), Southern Copper Corp (PCU), Tanger Factory Outlet Centers (SKT), Teleflex (TFX), The Dixie Group (DXYN), The Estee Lauder Companies (EL) and The McGraw Hill Companies (HILL).

TransCanada Corp (TRP), Trinity Biotech (TRIB), Under Armour (UA), UniFirst (UNF), United Rentals (URI), United States Steel Corp (X), Valero Energy Corp (VLO), Vishay Intertechnology (VSH), Waddell & Reed Financial (WDR), Walter Industries (WLT) and Whirlpool Corp (WHR).

Several economic reports are due today: ICSC/Goldman Sachs Chain Index for Oct. 25, Redbook Retail Sales Index for Oct. 25, August S&P/Case Shiller Home Price Index, October Conference Board Consumer Confidence (the consensus expects 52), October Richmond Fed Mfg Survey and the ABC/Washington Post Consumer Confidence for Oct. 26.

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