Sam Collins

'Good Overbought' or 'Bad Overbought'?

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After the solid gains of last week, stocks were due for some profit-taking, and Monday started and ended on that note. As for the Dow Jones Industrial Average (DJI), the financial stocks in the index took the biggest hits with American Express (AXP) off 2.9% and Bank of America (BAC) down 2.2%. Both the Dow and the S&P 500 (SPX) were lower throughout the session.

However, the Nasdaq (NASD) gained more than 5%, with biotechs and other technology stocks leading the way higher. An exception was Dell (DELL), which fell more than 4% following an announcement that it will acquire Perot Systems (PER) for $3.9 billion ($30 per share), which was close to a 70% premium to Friday's closing price. PER closed out the day at $29.56, up $11.65.

The Wall Street Journal noted several traders who still think that September will close on a sour note. But most agreed that, if the market does have a correction, it will probably be shallow and short-lived since there is still a lot of money on the sidelines waiting for the right opportunity.

The Journal article quoted Alan Valdes, head of floor operations for Kabrik Trading in New York, who said, "The mood among traders remains bullish, with many expecting a year-end market rally fueled by hoarded cash. At the end of the day, guys are paid to manage money, not to have it sitting in a bank account earning less than 1%."

At the close, the Dow was down 41 points to 9,779, the S&P 500 was off 4 points to 1,065, and the Nasdaq rose 5 points to 2,138. 

The NYSE traded 1.2 billion shares with decliners ahead of advancers by 2-to-1. On the Nasdaq, decliners were ahead despite the gain in index points, with several hundred more sellers than buyers. Volume on Nasdaq was 723 million shares.

October crude oil fell $2.33 to $69.71 a barrel, and the Energy Select Sextor SPDR (XLE) fell 47 cents to $54.71. The fall was said to relate to a stronger U.S. dollar, which was in reaction to the upcoming two-day Fed meeting when the central bank is expected to begin easing stimulus measures. 

December gold fell $5.40 to $1,004.90 an ounce, and the PHLX Gold/Silver Index (XAU) fell $2.01 to $166.02. 

What the Markets Are Saying

Yesterday's mild selling has no impact on the direction of the market, but we could get more of the same today, as the indices may pull back to the first level of support at their respective 20-day moving averages. For the Dow it's 9,568 , for the S&P 500 it's 1,035, and for the Nasdaq it's 2,047.