Insights

Market Wrap – Dell and Intel looking good, Dow gains 75 points on the Week

Today the Dow and S&P 500 finished lower while the Nasdaq 100 added 2.27 points.  The relative performance by the Nasdaq was the result of good news out of the hardware space by Dell (NSDQ: DELL), which beat top and bottom line numbers after the close yesterday.

Dell beat the top line revenue number by $200 million ($12.8 billion vs. $12.6) and beat the bottom line earnings number by 5 cents ($0.28 vs. $0.23).  CEO Michael Dell stated that Dell expects strong performance in 2010 helped by a replacement cycle sparked by the release of Windows 7 by Microsoft (NSDQ: MSFT), which is due in October.  DELL gained $0.27 on the day (+1.76%, $15.93).

Intel (NSDQ: INTC) raised their third quarter expected revenues by $500 million saying chip sales were looking up.  Combining this news with the Dell release, a case can be made that the tech sector could be gaining new life and coming out of this recession.  Intel gained $0.78 today (+4.00%, $20.25).

On the week, the Nasdaq 100 was mostly unchanged gaining just over 5 points (+0.3%, 1643.24).  The Dow rose 75 points this week (+0.7%, 9580.63) and the S&P 500 was up 2.8 points (+0.3%, 1028.93).  The week was characterized by low volume and a zig-zagging market with many reversals.  Over the past 5 years the month of August has had the following returns for the Dow; +1.4%, +1.1%, +1.7%, -1.5% and +0.3% with the average being a gain of 0.6%.  With the Dow up 0.7% for the month thus far, it looks like we are right on track to keep with the August trend – a gain with low volume.

Gold gained $6.70 and finishes the week at $955 an ounce.  Looking at the weekly chart of the SPDR Gold Trust (NYSE: GLD), shows that gold has closed out the week no lower than $93.00 in the past 6 weeks, and today’s close at $93.87 is the highest weekly close for the GLD in 12 weeks.  Oil gained 25 cents on the day and traded just below $70 as its low for the week while trading $75 for the weekly high.  Today’s close at $72.76 leaves oil right in the middle of its weekly range.

American International Group (NYSE: AIG) went vertical again, trading up 5 points in the pre-market with the stock spiking to the day high of $55.80 within two minutes of the open.  Yesterday, AIG closed at $47.85, so adding $7.95 within two minutes while trading five million shares may qualify as a blow off top (commonly associated with peaks in a stock).  The trading frenzy settled a bit after the first hour of trading, as the stock proceeded to form a rough symmetrical triangle intra-day, otherwise known as a spring or a coil.  This formation is most commonly a continuation pattern, but can also signal a reversal if the stock breaks down below the lower uptrend line forming the triangle.

A second signal a stock is breaking down out of a triangle is when it trades lower than the previous definable bottom forming the triangle.  AIG broke through this level of $53.80 at 11:25 a.m. and the stock promptly dropped like a stone, trading all the way down to $45.55 in 53 minutes (12:18 p.m.)  To put into perspective how crazy this volatility is, this one move in 53 minutes is more than 99% of stocks move on any given day.  AIG rebounded of its lows and closed at $50.20 (+4.9%, $2.39).

With this being one of the ‘doldrums of summer’ trading weeks for the markets, the traders that are not on vacation and gunned up for action, seem to have adopted Fannie Mae (NYSE: FNM), Freddie Mac (NYSE: FRE), Citigroup Inc. (NYSE: C) and AIG as their ‘roll the dice and let’s have some fun’ stocks.  This is kind of like a group of teenagers hanging out on the street corner trying to see what kind of trouble they can get into to stave off boredom.  If you are playing any of these stocks make sure you are nimble, make sure you are quick because Market Jack can take away this candlestick in the blink of an eye.

The major headlines for the week included; the U.S. is $2 trillion more in the hole, signs the housing market might be bottoming out, Ben Bernanke keeps his job but loses his identity, trading in AIG goes crazy, Alan Stanford engages in blood rituals and the Boeing Dreamliner 787 may FINALLY fly.

Have a greet weekend.