DOW Breaks 13,000 But Can’t Hold, Are the Markets Getting Tired

2-22-2012

The DOW broke 13,000 in early trading and the financial media outlets were all gushing with elation.  It was short lived though and the indices gave up their early gains finishing essentially flat at the close. The DOW and S&P just managed to remain in the green while the NASDAQ finished down marginally.

Up Volume was 51% on the NYSE but only 39% on the NASDAQ.  This would explain the virtual tie on the big board, but not the NASDAQ.  If you take a closer look, much of the NASDAQ gains were attributable to Apple (APPL).  Take out Apple, and the NASDAQ had a much weaker performance than the price indicates.  Again, this is why mega cap stocks can skew the indices.

Gold, silver, miners, and oil all had a big day and many commodities are coming alive again.  The exception being some of the soft commodities, but they will likely catch up as more easing by the money center banks kicks in.  The ECB and Chinese Central Bank are the primary culprits now, with Japan, England, and our FED taking a back seat for the moment.

Commodity prices rising with interest rates while bond prices fall makes sense if expectations forward are for inflation.  And bonds are beginning to come under pressure due to all the easing.  The ProShares UltraShort Treasuries (TBT) is beginning to break out (see graph).   But shorting treasuries is a tricky game because Benanke could come in at any moment stepping up treasury buying.  If you short TBT, be sure and use stop losses.

Yesterday I stated any new buying should be done with caution.  This holds true and you need either mental or hard stops to minimize losses.  You may even want to hold off on new buying and wait for a better entry point, or see if a rally attempt can produce more momentum to the upside.  Being patient is the hardest thing do, but sometimes it is the best thing to do.

In overnight trading (Tuesday 11:35 p.m. CST) most of the Asian equity markets are in the green.  Part of the reason is the weaker Yen.  The Yen weakened to 80 per US dollar for the first time since August.  Over a 1/4% loss against the dollar in one day.  The Euro is slightly weaker against the dollar, but the Pound is strengthening.  Gold, silver, and oil are giving back a small portion of their impressive gains from earlier in our trading session.

Our US equity futures are slightly in the green.  The DOW futures are up 16 points, the S&P futures are up 2 points, and the NASDAQ futures are up 5 points.

Today’s economic reports include Existing Home Sales, and MBA Mortgage Applications.  We have 15 companies reporting earnings on the S&P today over a broad spectrum of industries.  Notable companies include Dollar Tree (DLTR) before market, and Windstream (WIN), Washington Post (WPO), Analog Devices (ADI), and Fluor Corp (FLR) during the regular trading session.  After hours, companies reporting include Hewlett Packard (HPQ) and Limited Brands (LTD).

At the moment, things are slightly positive.  Let’s see if they hold.

Blackbaud (BLKB), Boston Beer (SAM), Concho Resources (CXO), Continental Resources (CLR), Hewlett-Packard (HPQ), Lithia Motors (LAD), Oasis Petroleum (OAS) and Yamana Gold (AUY) will report earnings Wednesday. Existing-home sales will be the main economic report out Wednesday.