by Sam Collins 05/16/08
Neutral economic data and lower oil prices contributed to a continuation of the rally that began last Friday. But the real mover yesterday was the announcement that CBS (CBS) would buy CNET Networks (CNET) for $1.8 billion in cash, followed by Carl Icahn's move to control the board of Yahoo! (YHOO).
Many market mavens have been saying that technology stocks should be the focus of buyers' attention, and the two announcements supported that view. CNET received an offer that is 45% above Wednesday's closing price of $7.41 -- and the stock closed at $11.41 yesterday.
And Carl Icahn's desire to control Yahoo! keeps this Internet deal in focus.
Meanwhile another deal was in the news and that, too, was technology-related: Comcast (CMCSA) is buying Plaxo, a closely held networking Web site, in an effort to broaden its services.
Dow component Chevron (CVX) was up yesterday on an upgrade by UBS (UBS), and this helped the Dow Industrials (DJI). But crude fell sharply and this helped the broader market.
At the close Thursday, the Dow (DJI) had gained 94 points at 12,993, the S&P 500 (SPX) was up 15 at 1,424 and the Nasdaq (NASD) jumped 37 points to close at 2,534. The NYSE traded 1.2 billion shares with advancers ahead by more than 2-to-1, and the Nasdaq crossed just under 900 million shares with a positive breadth of 5-to-3.
June crude oil futures fell 10 cents to $124.12 and traded as low as $120.90 -- the lowest price since May 7. But the Amex Energy SPDR (XLE) held its own, gaining $1.20, and that's another new closing high for the XLE.
Gold futures for June delivery jumped $13.50, closing at $880 per troy ounce -- putting pressure on the resistance at $890. The PHLX Gold/Silver Index (XAU) gained $6.81 to close at $182.33.
What the Markets Are Saying
After almost two weeks off and being virtually disconnected from the happenings of Wall Street while my wife and I toured various Black Sea and Mediterranean ports, it may benefit our readers if I take a broader view of the markets before delving into the more-arcane technical indicators -- a process that I'll get into next week.
Currently the S&P 500's (SPX) chart shows a type of inverse head-and-shoulders reversal pattern -- a very powerful technical event. The neckline at 1,396 has been conclusively penetrated after reversing up from the 20-day moving average on a pullback last week.
A new stochastic buy signal supports a continuation of the move higher, but massive overhead will more than likely slow the gains, and the 200-day moving average at 1,428 -- just 5 points higher -- also has to be surmounted.
Like the S&P 500, massive overhead on the Nasdaq (NASD) is likely to slow the advance as well. And the stochastic indicator is very overbought, thus supporting the view that the buying may slow down the advance. But the 200-day moving average was penetrated yesterday, and if the Naz can hold onto that, it could make a quick run to 2,600 and our summer target of 2,670.
Remain long, with emphasis on technology stocks and quality blue chips.
Today's Trading Landscape
Expect earnings today from Abercrombie & Fitch (ANF), Ambient (ABTG), British Airways (BAIRY), Fairpoint Communications (FRP), Hanover Capital Mortgage (HCM), Implant Sciences (IMX), Lowland Investment (LWI), OSI Restaurant Partners (OSI), Pinnacle Gas (PINN), Sinovac Biotech (SVA) and Telanetix (TNXI).
Economic reports include Housing Starts (consensus expects 940,000) and Consumer Sentiment (62.8 expected).
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'Irrational exuberance' has hit the energy markets. Be cautious about new positions in the sector.
Tuesday could have provided a pivot point as the SPX, the NASD and the DJI gave important signals.
Now under its 50-day moving average and its stochastic indicator undervalued, ENB looks like it could jump.
All eyes should be on the VIX and VXN for the buy signal (if one is to come).
AUY could break higher, but you should limit risk with a stop-loss.
