The Dow Jones Industrial Average’s close on Friday marked the first time in over a month that the index had closed at a weekly loss. The decline resulted from the continuing uncertainty overGreece. Almost every day the market fluctuations were tied in some way to news about the political situation there.
Some had hoped that by the weekend the G-20 meeting would provide some encouragement for Europe, but it ended with no further support forGreeceor for any European nation. A shift in focus toItaly’s economy, which is much larger thanGreece’s, ended the week on a sour note withItaly’s 10-year bond rising 47 basis points in the last six sessions and yielding 6.34%.
Despite the volatility, the S&P 500 and its companion indices accomplished very little last week. Near term the index is stuck between 1,220 and its 200-day moving average at 1,273. The neckline at 1,260 is giving the index an immediate problem with the intraday high on Friday hitting that mark and turning away from it. Midterm support is at the 50-day moving average at 1,196 (blue line). The longer-term trading range is marked by black hash marks with the highs of July and October on the top and the lows of August and October at the bottom (1,285 to about 1,060.)
Our internal indicators (MACD, stochastic, RSI and momentum) are mildly bearish. The AAII Sentiment Survey showed that bulls fell slightly to 40.18% from 43%, and bears increased to 29.62% from 25%. This is a contra-indicator, and so with the bulls still at a traditionally high number, the bears’ increase is not enough to offset an overall bearish reading for the market. The CBOE Volatility Index (VIX) at 30.16 is also mildly bearish.
Investors usually fly to several “safe havens” in tough times, i.e., gold and the U.S. dollar. (If you’re a trader that is willing to take on a little more risk, my colleague Joe Burns has some option trades that may interest you.)
The dollar as measured by the PowerShares DB US Dollar Index Bullish Fund (NYSE:UUP) held above its 200-day moving average after a jump from a late October low. And gold as measured by the SPDR Gold Shares (NYSE:GLD) staged a comeback, rallying from its bullish support line (red dash) in October and is holding above its 50-day moving average.
With earnings of most of the big movers of the S&P 500 reported and the situation with Greece still not resolved, investors have several major areas of concern that are holding back stocks.
- Europe’s other weak economies, chieflySpainandItaly(note that Italian bonds fell sharply last week);
- China’s inflation rate and their leaders’ tightening of credit, which could have a nasty impact on the West;
- The threat of a double-dip recession in theU.S.economy.
As for U.S.economic indicators, Citigroup’s (NYSE:C) economist advises keeping an eye on holiday season sales, the job market, and improved data on durable goods and manufacturing.
With volume contracting on the upside days and the market caught in a narrow trading range, the bears continue to apply pressure. Investing in a market with so many uncertainties pushes most investors to the safer havens of bonds and precious metals, while traders continue to do well playing the daily swings.Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
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