-- Monday, October 26 --
WHO PULLED THE PLUG?
A technical malfunction stops trading on the New York Stock Exchange for one hour during an already desultory, low-volume day. Nasdaq and small-caps soar above the market.
Most sectors of today's market didn't have much steam to them before, during, or after the electronic snafu that ground trading to a halt in New York. The afternoon breather, while perhaps refreshing for the floor traders of the NYSE, didn't exactly invigorate business, as the market glided downward like a falling autumn leaf when trading resumed.
Internet stocks created the most fuss today as the entire industry bubbled in anticipation of America Online (AOL) announcing its quarterly earnings tomorrow after market close. If this fall's earnings season is any guide, the "Buy on rumor; sell on news" principle will play out, and the current excitement over the online industry may settle down if AOL doesn't beat expectations substantially.
Besides the Nasdaq, which gained a startling 1.4 percent on a day when its traditional relationship to the Dow should have left it in negative territory by a few points, the Russell 2000 bolted upward by 1.2 percent, continuing its heartening rebound. Since October 8, the Russell has regained about 22 percent of its lost ground. This is a strong sign of optimism and eagerness to speculate that runs broader and deeper than the blue-chip level.
TIDBITS: The fall earnings season is entering the home stretch. About 70 percent of the S&P 500 companies have reported quarterly financials.
SECTOR WATCH: Internet stocks carried the torch today, riding on high hopes for good earnings from WOL tomorrow. A rally in the oil and oil services sector balanced last week's slippery performance. An interesting divergence occured today between bonds (finishing up) and utility stocks (finishing down). It's more common for bonds and utilities to rise and fall in tandem, as both represent a "safe haven" for money exiting the stock market.
TECHNICAL ANALYSIS: The OEX index (oil and oil service companies such as refining and drilling firms) is nearing completion of a classic, beautiful "W" pattern. Such a pattern lends confidence to the speculation that the sector has found its bottom, and is in a trustworthy recovery. See chart at
bradhill.com
LOOKING AHEAD:
Tuesday: About 300 companies release quarterly reports. Watch for America Online (AOL) and Ameritrade (AMTD).
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Brad Hill
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