The Good News About Yesterday’s Sell-off

Yesterday, stocks again traded on the news of the day and the headlines werent
pretty: Possible war in Korea, a resurgence of Europes debt crisis, Chinas
monetary tightening, a major insider trading probe of Wall Street firms, and a
downgrade of the Feds projections for the U.S. economy. With stock markets
closed on Thursday and a short session on Friday, there were some traders who
obviously just want to exit positions and avoid risk. Only one stock of the 30
Dow Industrials rose, and that was Hewlett-Packard Company (NYSE: HPQ ), up 2.2%
as a result of better-than-expected earnings coupled with higher future earnings
guidance. But another big technology stock, Microsoft Corporation (NASDAQ: MSFT
), led the decliners, falling 2.4%.  The U.S. dollar rose 1.3% as investors
sought its safety. It was the biggest one-day advance for the buck in two
months. And the European sovereign debt problem drove the 10-year Treasury note
up 16/32 to a yield of 2.813%. At the close, the Dow Jones Industrial Average
lost 142 points at 11,037, the S&P 500 fell 17 points to 1,181, and the Nasdaq
lost 37 points at 2,495. The NYSE traded just over 1 billion shares and the
Nasdaq traded 525 million shares. Decliners outnumbered advancers by about
3-to-1 on both exchanges. Crude oil for delivery in January fell 49 cents to
settle at $81.25 a barrel. The Energy Select Sector SPDR (NYSE: XLE ) was off
$1.24, closing at $62.15. December gold rose $19.80 to $1,377.60 an ounce. The
PHLX Gold/Silver Sector Index (NASDAQ: XAU ) fell 2.23 points to close at 212.5.
What the Markets Are Saying With so much bad news around, the remarkable thing
about yesterdays decline was that it wasnt worse. Just weeks ago, a single
crisis of the magnitude of any of yesterdays heart-pounders would have driven
stocks down several hundred Dow points. Instead, the Dow fell 1.27% and the S&P
500 was down 1.43%, which makes the reaction to the bad news look like an
ordinary day of profit-taking with decliners ahead by 3-to-1. Its impossible to
predict the outcome or full impact of the North Korean attack on its neighbor,
so uncertainty hung like a cloud over trading yesterday, and we all know how
Wall Street feels about that. However, not only did stocks have a modest day
down but they ended the day with a small rally. The support at Dow 11,000 held,
as did the oft-repeated support line of the S&P 500 at 1,174, and the 50-day
moving averages of the major indices held as well. The Nasdaq even closed the
trading gap at 2,456 to 2,502, which was opened last Thursday, and rallied to
the midpoint of the days trading range. So the day ended with stocks acting much
better than anyone could have imagined. That is an encouragement to the bulls,
and if we can get through the remainder of this holiday week with little damage,
we may even launch into December with a meaningful rally. If that happens, this
ETF could pay big . A friend sent a simple but meaningful Thanksgiving card to
me yesterday morning that I will pass on to you: Take time to appreciate your
family, friends, and all the joyful memories that make Thanksgiving so special.
Todays Trading Landscape To see a list of the companies reporting earnings
today, click here . For a list of this weeks economic reports due out, click
here . If you have questions or comments for Sam Collins, please e-mail him at
samailc@cox.net .