Brace for a Sell-off

Late selling, which was primarily focused on the technology sector, drove
prices lower, and we posted the first monthly loss for the major indices in
three months. The Dow Industrials were off 1.01% for November, the S&P 500 was
down 0.61%, and the Nasdaq was off and 1.01%. Sovereign debt problems were again
at the forefront of news, as S&P put Portugals debt rating on credit watch, a
warning that in most cases leads to a downgrade. And the yield spreads on the
debt of weaker euro nations widened in response. Despite an improvement in
consumer confidence and better manufacturing results, the euro crisis seemed to
overshadow all else. The latest consumer confidence numbers for November rose to
a five-month high of 54.1 from 49.9 in October. But U.S. home prices were down
1.5% in the third quarter. Tech stocks fell 1.4% yesterday, making them the
poorest performing group. The sector was also one of the worst performers for
the month, off 1.8%, and contributed greatly to losses in both the S&P 500 and
Nasdaq. The Nasdaq was especially hurt by Google Inc.s (NASDAQ: GOOG ) 4.5% loss
yesterday, following reports that it is offering to buy Groupon, a social
network geared toward discount shoppers. The Groupon story was followed by the
announcement of a European Commission antitrust investigation into allegations
that Google has abused its dominant position in online search. Caterpillar Inc.
(NYSE: CAT ) rose 1.1%, which resulted from a better-than-expected report from
the Chicago-area manufacturing data. Wal-Mart Stores, Inc. (NYSE: WMT ) rose
0.5%, and The Walt Disney Company (NYSE: DIS ) gained 0.3%. Treasurys ended
November with a gain when late in the month investors fled to safer assets.
Yesterday, the benchmark 10-year notes yield fell to 2.795%. The 30-year bond
yielded 4.101%, and the euro fell to $1.2981 from $1.3123 on Monday. At the
close, the Dow Jones Industrial Average was down 47 points to 11,006, the S&P
500 fell 7 points to 1,186, and the Nasdaq was off 27 points at 2,498. NYSE
volume totaled 1.54 billion shares, and the Nasdaq traded 807 million shares. On
both exchanges, decliners outpaced advancers by about 2-to-1. Crude oil for
January delivery rose $1.97 to $85.73 a barrel in the face of both a stronger
dollar and lower stock prices. The fall was attributed to buying of gasoline
futures. The Energy Select Sector SPDR (NYSE: XLE ) fell 22 cents to $62.71.
February gold gained $3.20 to settle at $1,367.50 an ounce, and the PHLX
Gold/Silver Sector Index (NASDAQ: XAU ) rose 2.37 points to 213.17. What the
Markets Are Saying For most of the month, and especially in the past 10 days,
the typical pattern has been early selling followed by a rally at the end of the
day. That pattern changed yesterday, with early selling, a rally at midday that
never got to the breakeven point, and then an afternoon of continuous selling
punctuated with a crescendo on the close. And there was another change, as well:
Some of the worlds favorite technology stocks drove the Nasdaq lower with a
negative volume ratio exceeding 3-to-1, while on the NYSE volume hit 1.55
billion shares for one of the highest volume days of the month. The major
indices closed the day within a hair of breaking down from Novembers significant
support zone. The Dow and NYSE Composite missed disaster by a fraction, but with
both, the intraday low cracked support. Also of importance, both the Dow and
NYSE Composite closed below their 50-day moving averages with the NYSE down the
most now almost a full percentage point below its important blue line. As for
sentiment, the widely followed CBOE Volatility Index (VIX) rose by more than 2
points to 23.54 an enormous jump from the 17.76 low registered just five
sessions ago. And the VIX closed above its important 200-day moving average for
the first time since late September.  Whats it all add up to?  In a two words:
more selling. The support at S&P 1,174 is within 8 points of cracking. Perhaps
the bulls can pull a rabbit out of the hat, but if they do, it will be akin to
pure magic helped along by more Fed Treasury purchases.   With the S&P 500 on
the verge of a breakdown, traders should buy this ETF . 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 .