Market Analysis – Bulls or Bears – Who’s the Stronger Beast?

 

Stocks again registered a triple-digit session for the third trading day in the past four. In contrast with Friday, which was off 159 Dow points, yesterday the index rose 143 points. Again the markets were directly influenced by the headlines of the day, focusing on some very positive economic reports.

A Commerce Department report showed that consumers cut savings and increased spending in March, giving the consumer discretionary sector a boost. And the Institute for Supply Management (ISM) reported that April was the strongest month in almost six years for U.S. factories, and that had direct impact on industrial stocks, which rallied sharply. Aditionally, U.S. construction spending rose for the first time in five months in March.

Both Ford (F) and General Motors reported that car and truck sales were up 25% in April. And Toyota Motors (TM) said that its April sales increased by 24%, while Honda (HMC) posted a 13% increase.

Materials stocks lagged and became the only major sector not to show a gain yesterday. The U.S. dollar was blamed for that decline since it was up 0.6%. The gains for the dollar were primarily against the euro and the yen following Greece’s pact with the European Union, which will provide Greece with a 110 billion euro financial aid package. But even that pact has not yet been approved by Germany, and other doubts regarding the stability of Spain, Italy, Ireland and Portugal remain.

Continental Airlines (CAL) and UAL Corp. (UAUA) agreed to merge. And that merger led to speculation that other airlines may also agree to talks.

At the close, the Dow Jones Industrial Average (DJI) was up 143 points to 11,152, the S&P 500 (SPX) gained 16 points to 1,202, and the Nasdaq (NASD) rose 38 points to 2,499. 

The NYSE traded 1.2 million shares with advancers ahead of decliners by 4-to-1. The Nasdaq crossed 628 million shares, and advancers led by almost 3-to-1.

Crude oil for June delivery rose 4 cents to $86.19 a barrel, and the Energy Select Sector SPDR (XLE) was up 67 cents, closing at $60.58. 

June gold rose $4.40 to close at $1,185.10 an ounce as more Europeans bought the metal as a safe haven against the continuing economic crisis in Greece. The PHLX Gold/Silver Sector Index (XAU) fell 2.4 points to close at 176.57.

What the Markets Are Saying

Volatility has returned to the stock market after almost a three-month absence. The standard measure of volatility is the CBOE Volatility Index (VIX). After languishing within a daily trading spread of a point and a half, the VIX’s average daily spread for the past week has been almost 2.5 points, and on April 27, it was a mind-bending 5.25 points.

The VIX’s volatility has increased, but with lower volume on the upside than on the downside. Despite the bulls’ ability to bounce back after big down days like Friday, they have not been able to achieve the volume of the bears, nor have they been able to capture the size of the daily spreads that the bears have recorded. 

So even though the bulls have rallied, they have yet to top the loss of the prior move down. Even when putting together Wednesday and Thursday’s back-to-back advances, they add up to an advance of 176 Dow points versus Tuesday’s decline of 214 points. And yesterday’s advance of 143 points compares to Friday’s decline of 159 points.

The bulls are going to have to do better if they want to turn the market around and slice through the April 26 intraday high at Dow 11,258. Until they do, we’ll stay on the defensive.

Today’s Trading Landscape

Earnings to be reported before the opening include: Alliant Energy, Alvarion, American Tower, Ameristar Casinos, Animal Health International, Archer-Daniels, ArvinMeritor, Baker Hughes, Beazer Homes, Bill Barrett, Blount International, Boyd Gaming, Broadpoint Gleacher Securities, BTU International, Cabela’s, Checkpoint Systems, Clayton Williams Energy, Cognizant Technology Solutions, Corinthian Colleges, Cornerstone Therapeutics, CVS Caremark, Cynosure, DineEquity, Domino’s Pizza, Duke Energy, El Paso Electric, Emerson Electric, FirstEnergy, FirstMerit Corp., Fresh Del Monte, Fundtech, Fushi International, Gaylord Entertainment, Glatfelter Co., Great Wolf Resorts, GTx, Haemonetics, Hawk Corp., Headwaters, Health Net, Henry Schein, Ikanos Communications, Impax Labs, Inergy, Inland Real Estate, Macerich, Magellan Midstream, Marathon Oil, Marsh McLennan, Martin Marietta, MasterCard, Merck, Molson Coors Brewing, Monotype Imaging, Navigant Consulting, NiSource, NYSE Euronext, Och-Ziff Capital, Overseas Shipholding, Pantry, Par Pharmaceutical, PennyMac Mortgage, Pfizer, Phoenix Technologies, Pinnacle Airlines, Portland General Electric, Radian Group, Ritchie Bros, Rowan Companies, RTI International Metals, Sempra Energy, Senior Housing, Sirius XM Radio, Spectra Energy, St. Joe Company, Steven Madden, Suncor Energy, Techne, Tenet Healthcare, Teva Pharmaceutical, Thomson Reuters, Unit Corp., Vornado Realty Trust, W&T Offshore, Westlake Chemical and Wisconsin Energy.

Earnings to be reported after the close include: 3D Systems, 3Par, Altra Holdings, American Capital, American Medical, American Reprographics, Argonaut Group, Atmel, Atwood Oceanics, Bio-Rad Labs, BRE Properties, Bway Holding, CAI International, Calamos Asset, Cambrex, Catalyst Health Solutions, Cephalon, Chesapeake Energy, Comfort Systems USA, Cray, Diamondrock Hospitality, DigitalGlobe, Dolan Media, Dollar Financial, Double-Take Software, Eclipsys, Endurance Specialty, Esco Technologies, Evergreen Solar, Exco Resources, Federal Realty Investment Trust, FEI, Force Protection, Glu Mobile, Grand Canyon Education, Healthsouth, Hersha Hospitality Trust, Hill-Rom, Integrated Device, Intrepid Potash, j2 Global, Jack Henry, Kenexa, Kforce.com, Kindred Healthcare, Kinross Gold, LECG Corp., Masimo, Mueller Water, Myriad Genetics, Onyx Pharmaceuticals, OpenTable, Peet’s Coffee, Pioneer Natural Resources, RehabCare, Republic Airways, SBA Communications, Stone Energy, Symmetricom, Syniverse Holdings, Tal International, TECO Energy, True Religion, Union Drilling, Unum Group, USEC, Watts Industries, Web.com, WebMD Health, World Fuel Services, Wright Medical, XL Capital, ZipRealty and ZymoGenetics.

Economic reports due: ICSC-Goldman Sachs store sales, Redbook, factory orders (the consensus expects -0.1%), and pending home sales.

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