Momentum Slows as Traders Tire

[Excerpted from Bill Cara's Daily Report]Upward momentum has clearly slowed and traders may be worn out. Forthe first time in many months, a better than expected economic numberenticed sellers into the market rather than buyers. The market peakedearly Tuesday morning when the Conference Board reported consumerconfidence had leapt up to 54.1, easily surpassing analyst expectationsfor a reading of 47.9. An hour later, Dow Jones reported Californiahome sales data had exceeded expectations, equities had another briefsurge higher (with S&P futures peaking at a lower high), beforereversing, declining to a new low for the session.

At the closing bell, the S&P 500 (1,028.00 +2.43 +0.24%), DJIA (9,539.29 +30.01 +0.32%) and NASDAQ Composite (2,024.23 +6.25 +0.31%) were up on the day, but the internal signs were flashing warnings.

The Toronto Exchange Composite (10,920.53 +130.56 +1.21%) did make a substantial gain, but the Toronto Venture Board (1,183.67 -2.69 -0.23%) ended down, reflecting a sidetracking gold price on the day ($GOLD 945.10 +3.70 +0.39%) but a crack in the Crude Oil price ($WTIC 71.85 -2.52 -3.39%).

In NY, with the much lower Crude Oil price, the Energy sector (XLE -1.5%) gave back more than the prior day’s gain, when XLE happened to be the leading sector in the market. The losing industry groups were the Oil Services ($OSX -2.3%) and Natural Gas stocks ($XNG -1.7%).

Financials (XLF +1.3%) were the sector leader, but the industry group leaders were Airlines ($XAL +4.0%), on the basis of much lower oil prices, and Biotech ($BTK +2.8%).

Earlier Wednesday, the Austral-Asian markets were all higher. Australia (4,464.4 +1.06%), Japan’s Nikkei 225 (10,639.7 +1.36%), Shanghai (2,967.6 +1.78%), Hong Kong (20,456.3 +0.10%), and India (15,762.2 +0.47%) were all up. Shanghai and Tokyo, today’s biggest winners, were yesterday’s biggest losers.

European stocks were soft in earlier trading Wednesday; the French CAC (3,675.1 5:46AM ET -0.15%), German DAX (5,538.6 5:46AM ET -0.33%) and FTSE 100 (4,911.0 5:46AM ET -0.12%) were all higher than yesterday morning at this time, but all down so far from yesterday’s close.

The biggest winners of the Cara 100 company stocks yesterday were Bed, Bath & Beyond, SanDisk and Walgreens (BBBY +4.2% SNDK +4.0% WAG +3.6%), while Dow Chemical, Votorantim pulp & paper and Electronic Arts were the worst (DOW -3.2% VCP -3.1% ERTS -3.1%).

Both Morgan Stanley and Bernstein issued ratings upgrades from neutral to overweight/outperform on Diageo (DEO). The DEO volume was +141% above average. My system gave me a Sell Alert, and $63.50 may be a short-term peak. I had seven other Sell Alerts on the day (also XOM, OXY, NE, and SLB, because of the Crude Oil reversal after these stocks had entered the Distribution Zone in my system, plus VCP, WHR and JNJ, which show signs of profit-taking).

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The US Dollar ($USD 78.23 -0.00 -0.01%) and Euro (142.98 -0.01 -0.01%) were flat on the day. The Yen (106.17 +0.36 +0.34%) was stronger, but the British Pound (163.42 -0.76 -0.46%) and the Canadian Dollar (92.00 -0.89 -0.96%) were weaker against the $USD.

The US long bond had a second straight winning session after Friday’s big loss ($USB 120.45 +0.69 +0.57%). Treasury yields dropped for the 30-year (4.230 -0.58 -1.35%), 10-year (3.450 -0.44 -1.26%) and 5-year (2.457 -0.31 -1.25%) instruments. The Treasury bill yield was unchanged (0.155).

In precious metals trading earlier Wednesday morning, there was not much happening. The spot (cash) market was as follows for: gold (949.28 +2.34 +0.25% 06:03am ET); palladium (283.0 -1.0 -0.35% 06:01am ET); platinum (1240 -1 -0.08% 06:01am ET); and silver (14.3900 +0.0800 +0.56% 06:03am ET), respectively. The prices have been largely unchanged for the past week. There was a notable period yesterday where silver looked like it was absolutely controlled.

Earlier Wednesday, Sept futures prices were as follows for the Euro [1.4322 +0.0014 +0.10% 05:49am ET], and DJIA [9528 +5 +0.05% 05:49am ET], and for Oct Crude Oil [72.33 +0.28 +0.39% 05:49am ET]. All these prices have been weakening since then.

Comments

[erniem:]

Thanks Bill, I decided a couple weeks ago to trim stocks and cut back to my primary dividend stocks last week. I am now anticipating a nice end of summer sell off as the huge jump the market has taken rationalizes.

Aug 26 11:33 AM

[whidbey:]

One last run into the fall is likely, but it will not start until after labor day, and it will not last past Thanksgiving Day I suspect. I am also hopeful that PM have a seasonal run this fall. Later? a slam down to ne?w lows is possible. Always something

Aug 26 01:55 PM