On Friday, world markets fell sharply when China signaled that it might tighten
its monetary policy in order to counter inflation. U.S. stocks pulled back as
well, with the Dow falling to its lowest levels since Nov. 22, giving back all
of the gains made since the midterm elections. But while the Dow fell 0.8%, the
Shanghai Composite fell 5.2%. Materials stocks, which could take a direct hit
from the Chinese decision, led the sectors of the S&P 500 lower. In Europe,
stocks fell again on fears of another bailout of Irelands debt. In corporate
news, The Boeing Company (NYSE: BA ) fell 3.5% following a downgrade by
Bernstein Research. The Walt Disney Company (NYSE: DIS ) was up 5.1% on rising
bookings at their theme parks. Intel Corporation (NASDAQ: INTC ) rose 1.4%
following a dividend increase of 15%. NVIDIA Corporation (NASDAQ: NVDA ) jumped
5.2% after beating Q3 estimates, and Dillards, Inc. (NYSE: DDS ) was strong, up
9.7% on much higher Q3 earnings than expected and a strong profit margin. The
yield on the 10-year Treasury note rose to a new two-month high 2.754% from
2.538% a week ago. And the greenback rose 2% against a basket of currencies. But
the euro held its own, being quoted late on Friday at $1.3693 compared with
$1.3659 on Thursday. At Fridays close, the Dow Jones Industrial Average fell 91
points to 11,193, the S&P 500 fell 14 points to 1,199, and the Nasdaq was off 37
points at 2,518. The NYSE traded just over 1 billion shares with decliners ahead
of advancers by 4.8-to-1. The Nasdaq traded 613 million shares with decliners
ahead by 4-to-1. For the week, the Dow was off 2.2%, the S&P 500 lost 2.2%, and
the Nasdaq fell 2.4%. Crude oil for December delivery fell $3.12 to $84.69 a
barrel, and the Energy Select Sector SPDR (NYSE: XLE ) fell 94 cents to $62.94.
December gold fell $37.80 to $1,365.50 an ounce on moves by China to curb
inflation. The PHLX Gold/Silver Sector Index (NASDAQ: XAU ) fell 5.93 points to
216.1. What the Markets Are Saying While Thursdays pullback could be attributed
to just one stocks bad day Cisco Systems, Inc. (NASDAQ: CSCO ) Fridays
continued selling is more troublesome. On Friday, each major index fell through
its near-term support and continued deep into the next support zone. For
example, the S&P 500 drove to an intraday low of 1,194 and into the wide zone of
1,174 to 1,210. It and the Dow spent most of Friday afternoon gaining against
early losses, and perhaps that momentum will carry through today. The bright
spot is that the S&P found support at its 20-day moving average at 1,195. And
the NYSE Composite and Nasdaq also bounced from their 20-day moving averages.
But the Dow Industrials failed to hold at the 20-day moving average, so its
near-term trend is down while the other indices are sideways. Moving Average
Convergence/Divergence (MACD) on all of the indices has signaled that a pullback
is coming and could last for several weeks as the market tests the major support
lines at Dow 11,000 and S&P 1,174. The upside goal of 1,200 to 1,220 is still
our target, but before buyers return, the enormous gains of October will most
likely result in a two-to-four-week consolidation that began following the
election. Day traders may want to short into any quick rallies, while
longer-term investors should hold cash and wait for the next buying opportunity.
For one ETF you can use to take advantage of a pullback, see the Trade of the
Day . 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 .
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