Market Commentary

Posted on January 24, 2010 by | Comments Off on Market Commentary

A lot of selling occurred in the market over the past several days. The beginning of earnings season often brings volatility to the market. Sometime for the good and sometime for the bad. I'm not quite sure what will happen but it doesn't hurt for market participants to be a little more cautious.

For the first time since June 2009, the Dow broke below its 50 day moving average for two consecutive days. The support at 10,300 was shattered at the close today so look for 10,100 to be the next level. It's worrisome that the index is far from the 150 day moving average of 9,700 range. What's more interesting and rather worrisome is the fact that the Industrial now closed below the halfway or 50% principal of 10,355 (please refer to Dow Theory posting on 1/10/2010). There are both bull and bear cases to be had.

The Transports broke the 4,050 today and gave us a weak signal going into the weekend.. Because of the Transports prior attempted to break 4,050 level 3 times last year, we are now in the danger zone.

Individually, companies have reported magnificent results. You would think that beating the street estimates would bring shares up but instead the opposite has occurred. Take a look at Intel which reported amazing results last Thursday. Earnings beat the street by 33% ($0.40 vs $0.30). Revenue guidance also came ahead of consensus. Intel shares were trading around $21.50 but now trading around $20.80. IBM is another name that beat the street but shares fell. This could be just tech related headlines. I begin to wonder if some of these names are fully valued.
Despite the negative forces in the market, a name that performed rather well was the one we prompted you to, Supervalu (SVU) which rose 7.6% over this past 5 days compared to the Dow and S&P 500 which lost 5%.

I recalled at the beginning of the week, Jim Cramer was very bullish on the market because Scott Brown won an election in MA. Citing CNBC, "Cramer says a win for Brown in MA could send stocks much higher." If this was the case, how can the Dow lose 435 points?

- Art

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