Wednesday, December 13, 2006

Weak Day in the Markets

I subscribe to a bunch of market letters. There is uniform commentary today about the market's weakness. For example, from Investor Guide Daily

Equities ended the day largely unchanged as the blue chip Dow Jones Industrial Average closed 1.92 points higher and the tech heavy NASDAQ rose less than a point. Stocks were given a boost in early morning trading by a strong November retail sales report and a wave of speculation about mergers in the airline industry which sent the stocks of a number of airlines including Continental (CAL: Charts, News, Offers) and AirTran (AAI: Charts, News, Offers) up. However, stocks failed to build on that early momentum on a day when trading volume on the NYSE was pretty light. A report which showed that crude oil inventories fell greater than expected also unnerved traders a little bit. Bond prices fell while the dollar gained on both the euro and the yen.

From Harry Boxer at the Tech Trader:

The markets barely made any headway today. But the start was strong. The futures were up on strong pre session economic news, and the market opened higher, but that was about it. They sold off sharply in the morning, held secondary support, and then bounced back and forth in a coiling-type pattern. In the last hour they attempted a rally and did break out, but there was very little follow-through and they backed and filled into the close.

From The

Merger talk in the airline sector gave stocks an early boost Wednesday, but the major averages pulled back amid rising oil prices and a selloff in the chip sector to finish the session little changed.

After touching a new intraday high of 12,368.61, the Dow Jones Industrial Average reversed ground and closed with a gain of 1.92 points, or 0.02%, to 12,317.50. The Dow received limited support from gains of 1.3% or more in components McDonald's (MCD - news - Cramer's Take - Rating), American Express (AXP - news - Cramer's Take - Rating) and Exxon Mobil (XOM - news - Cramer's Take - Rating).

Notice the phrase, "after touching an intra-day high". Traders like to see markets advance through highs and close above them. That indicates traders are confident prices will move higher. When prices don't close above new highs, it indicates hesitation and concern; traders don't want to carry those new positions overnight for fear that news will create selling pressure in the morning.

Also, considering the strength of today's retail sales report, volume could have been stronger.

Food for thought.