Market Talk

We pointed last week to the $103-$104 area as a breakout range for Nymex crude. Well, as you can see it broke through that, holding around the $105 level this morning. Having broken through that resistance wall, it appears to be headed higher.

The key level still appears to be this $103 range. It fell into that area earlier, then bounced back, and as of this writing it appears to be testing the level again (looks like two tests of it so far today.) If support there holds, Newswires’ Stephen Cox wrote this morning, crude will be headed for about the $107/barrel level, and ultimately to $127.

Don’t even wonder what that’ll do to gas prices. You’ll have more reporters than customers at the truck stops on the New Jersey Turnpike.

At the same time, the level to watch for on the DJIA is 12000, which represents roughly the uptrend line drawn back to the August lows, as noted by Dennis Gartman, who edits and publishes The Gartman Letter. Gartman wrote that the Nasdaq Comp may have already broken its uptrend line, and if the Dow closes under 12000, it’ll be headed for 11400.

Right now, stocks are surging, with the Dow up 70. They’re fighting. We’ll see where that goes; markets are very, very volatile these days.

I used to think all this technical analysis stuff was goofy, that there’s no way to boil a market run by human beings to a bunch of numbers. But I got to tell you, I’ve watched more than my share of these numbers get hit, and the market lurches up or down in reaction. In a world where most of the markets are controlled by computers, and those computers have these numbers programmed into them, it makes sense to pay attention.

- “I continue to believe this recent rally is a case of the banks dragging the rest of the market higher,” The Pragmatic Capitalism blogger says. But that optimism may be short-lived. “Keep tabs on the next few weeks of earnings season as strong earnings are likely being priced in as we speak,” blog adds. “More importantly, expect the weak economic data to take center stage as we get deeper into earnings season and bullishness returns.”

- Rumors of an Apple (AAPL) iPhone 4 recall are floating around the blogosphere, but analysts are convinced it’s a highly unlikely event. Analysts say the issue isn’t serious enough to warrant such drastic action. “Seriously, an iPhone 4 recall?” Digital Daily blogger John Paczkowski ponders. “Steve Jobs would rather recall hiring John Sculley.”

- Apple’s reportedly begun removing discussions about Consumer Report’s decision not to recommend the iPhone 4 from a customer response portion of its website. Apple has been known to remove or lock discussion threads before, drawing ire from unhappy customers

- Trading of S&P 500 stocks has reached its highest correlation since the 1987 crash. “I think it’s more of a sign of indecision, and traders sitting on their hands,” Barry Ritholtz writes at The Big Picture.

- Even though Windows XP has been around for nearly a decade, Microsoft (MSFT) now says it doesn’t have plans to retire it anytime soon. “Our business customers have told us that the removing end-user downgrade rights to Windows XP Professional could be confusing,” MSFT says on a company blog. It’s a pretty unusual move, but “with 74% of business PCs running XP, the move is more proof that it’s the OS that won’t die,” Gregg Keizer writes at ComputerWorld.

- Today’s FDA advisory committee meeting to evaluate safety of GlaxoSmithKline’s (GSK) diabetes drug Avandia is generating lots of buzz on Twitter and various health blogs. For a sample, try CardioBrief.org by longtime medical journalist Larry Husten, who’s posting updates with a touch of irreverence every few minutes.

- Research In Motion (RIMM) has unveiled a new, free application to enhance security for consumer users of its BlackBerry smartphone. BlackBerry Protect will allow consumers to remotely backup and restore data on their device, as well as locate lost or stolen devices via a desktop computer. The app, disclosed by RIMM on its Inside Blackberry blog, will be available in limited beta testing later this week and open beta later this year.

- “In decades of market analysis, I can’t remember a time that I’ve heard many analysts quoting some support or resistance level as being ‘critical’ for the market,” John Hussman writes.

- Stubbornly high unemployment rate gets lots of attention, but labor market’s fragility is evident in declining hourly wages, former labor secretary Robert Reich says. June’s decline in average weekly hours worked sent weekly paychecks down 4.5% at an annualized rate, he notes. “In other words, Americans are keeping their jobs or finding new ones only by accepting lower wages.”

- WSJ’s George Steinbrenner obit.

Dow Jones columnist Tomi Kilgore reports on some key technical levels to keep an eye on:

The Dow Jones Industrial Average has reached the key 9830-9880 resistance range, which is defined by the early-February, early-May lows. This area needs to be cleared on a closing basis within the next couple sessions or the bounce will look very much like a “dead cat.”

If the DJIA breaks through, the next levels to watch are 9950-10000, followed by 10150-10200. Since the underlying technical indicators haven’t been showing signs of outperformance relative to the DJIA’s price (bullish divergence), the odds currently favor the “dead cat” scenario.

DJIA lately up 153 at 9840. There should be minor support at the 9750-9775 level, followed by the 9610-9625 area.

Get along, little doggies.

The burden is still on the bulls to prove they can break out of the selling pressure that’s been rattling the cages the past six weeks. They’re making a pretty good case this morning, but as the market has proven time and again, it’s how you close that counts.

Stocks raced out of the gate, with the Dow opening up about 175 at the open, racing to more than 225 recently. The S&P 500 surged as much as 25 points, all the way to 1080. That, incidentally, is where resistance lies, according to UBS’ Art Cashin, who puts it in the 1080-1084 range. “A move (and close) above that would give the bulls new life.”

The first attempt to vault that level seems to have been rebuffed, although it won’t be the last. On the other end, the big support level of 1040 still stands, but nobody’s going to be talking about testing that today, unless things really crack.

But until the bulls get that new life, any rally should (and is) suspect. Listen, stocks are getting a lot of help from the euro today, which is bouncing off its recent lows, and back above $1.21 this morning on the latest soothing talk out of the ECB, which said it’s only maintaining its current battery of emergency actions, not adding any.

The euro is “a very credible currency,” ECB chieftain Jean-Claude Trichet said. Listen, if you have to tell people that you’re cool, I got bad news for you, Jean-Claude. You’re not cool. (Or, it goes like this: if you have to tell people you’re not Greece, you’re Greece.)

“We still expect pessimistic sentiment to help trigger a (stock) rally, but are getting concerned longer-term,” Brown Brothers Harriman said in a note late yesterday.

We think the bull market is aging, the most robust gains are behind us, and a wide trading range may be developing. As long as 1040 support is intact, we expect a rebound in the S&P 500 to develop. On the other hand, significant weakness has been exhibited throughout the correction putting the index’s longer-term trend in question. Further burden is now put on the bullish camp to disprove a possible longer-term topping process.

The first big test of that, firm says, will come at 1105.

(Photo: Paul Vigna)

US stocks bouncing around the break-even level after Friday’s dramatic session, with consumer discretionaries leading the gains after Hasboro’s (HAS) better-than-expected 4Q report.

With stocks flirting between positive and negative territory, it’s worth debating how long this recent correction will last. In particular, traders are keeping an eye on the S&P 500, which was down more than 9% from its late-January high through its intraday low on Friday, when a sharp late-day rally kicked in as buyers made early bets that a traditional 10% correction was nearly complete.

Based on its closing level, the S&P came into Monday’s action off 7.3%. But technicians are still on guard against a so-called “re-test” of the recent lows to complete the 10% pullback, which would take the broad index to 1035.

Also keep in mind the index tested and reversed off some key support levels on Friday, according to Kevin Lane, director of quantitative research at Fusion Analytics. “Weekly momentum indicators are losing momentum and are close to flashing some sell signals,” he says. But until near-term support is broken near 1026, “it is hard to get too negative.” Bottom line, “the trend is up and remains intact and only a move below the 1026 level would be viewed as a negative,” Lane adds.

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Market's stamina will face a stiff test today.

US stocks bounce at the open as better-than-expected earnings from Exxon Mobil (XOM), a larger-than-anticipated rise in personal income and strengthening manufacturing activity fuel the rally.

But keep an eye on the run-up’s stamina, as the stock market has portrayed an ugly pattern of late. Stocks have shown hefty gains at the open in recent sessions, only to see those gains drift away by mid-afternoon, putting any rally’s sustainability in question.

Dow rose as much as 119 on Friday, only to close down 54 – near session lows.  Same thing happened last Tuesday, when the index rose as much as 88, but eventually lost all the gains and finished down three. And prior to today’s action, the Dow was down 6% since Jan. 19.

“There’s simply no way to sugarcoat it,” Bespoke Investment Group says, as recent trading suggests stocks may have risen too fast, too soon. (The Dow rose 64% between mid-March and Jan. 19.)

The long-term uptrend is also getting close to breaking. “If the uptrend breaks, investors will need to reposition their portfolios, which ultimately puts even more pressure on share prices,” firm adds.

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Let's see, GDP, up, stocks, cranked...Oh, criminy, that's reverse!

After jumping out to sharp gains this morning on the back of a stronger than expected GDP report, US stocks tumble, with tech shares getting hit particularly hard.

DJIA loses 54 (0.5%) to 10066, down roughly 1.1% on the week, after rising as much as 119 today. S&P 500 drops 11 (1%) to 1074, falling through support at 1080. Nasdaq Comp tumbles 32 (1.5%) to 2147. It’s an ugly selloff, with indexes closing near the lows.

The selloff that began two weeks ago (with a prescient VIX sell signal, incidentally,) has been technically driven. But it’s also been driven by the ever bendable laws of economics: nothing goes up in a straight line, and after a 10-month rally, stocks are overdue for a correction. It’s that simple.

Since cresting in the middle of the month, stocks have come down hard. Since closing at 10711 on Jan. 14, the DJIA is down 6%, and suddenly it’s 10000, not 11000, that traders are looking at. Both the Dow and S&P 500 have slipped under their 100-day moving averages, which had been providing comfortable support.

For the month, the Dow is down 3.5%. It’s only the index’s second losing month out of the past 11 and snaps a six-month winning streak.

Fourth-quarter GDP comes in at 5.7%, its best pace in years. But more than half of it comes off inventory readjustments, and consumer spending — which will drive any long-term recovery — remains weak. Partially that can be explained by a separate report today that showed wages and benefits growing at their slowest rate in about 30 years.

- Overseas stocks ahead of US on correction course. “But note: Over the last year, foreign stocks have mostly followed the US market trend, not led it,” Tom Petruno says. “At this point, they probably don’t have a message for Wall Street so much as they’re looking for a message from Wall Street.”

- “Millions” of Kindles flying off Amazon’s shelves. TechCrunch’s Michael Arrington pegs it at 3 million.

- Hard to draw conclusions in this complicated market. “The markets right now are especially complicated and appear to be facing fundamental things that it has either never faced or not faced in modern times,” says Roger Nusbaum, portfolio manager at Your Source Financial.

- S&P 500 crashes through support. Traders had been watching 1080-1085 level. So much for the strong opening. “The reversal today was telling,” FusionIQ CEO Barry Ritholtz says.

- It’s getting ugly out there. “This type of action, when the market trades sharply down even though economic reports and earnings reports both beat estimates handily, is not good,” Bespoke says. “There’s simply no way to sugercoat it.”

- Seems like Apple hasn’t lost affinity for AT&T. “Apple has been happy with the company as a carrier partner and is confident of its plans to vastly improve its network,” Digital Daily blogger John Paczkowski says.

- Pressure on the euro accelerates as currency falls below $1.39 for first time in more than six months.

- Might be a little soon to talk about “post-crisis” times, Pimco CEO Mohamed El-Erian says. “Too many markets, too many institutions have assumed this would happen quickly,” he notes.

- AIG releases list Of troubled derivatives contracts. AIG says in SEC filing that it’s releasing documents “due to recent public disclosure of the full contents of Schedule A,” a detailed listing of $62.1 billion in notional value derivative transactions its financial products group wrote.

- This blog needs more Gaga!