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Reversal of Fortune: Stocks Start Strong, Finish Weak

Declining gold futures have lost nearly $22 during the last three sessions

by 5/8/2014 4:17:34 PM
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"It was a tale of two halves, as the market bounced big early in the day, then sellers took over the second half of the day," recapped Schaeffer's Senior Technical Strategist Ryan Detrick, CMT. "In fact, small-caps and tech were actually leading early -- but just as we've seen many times the past several weeks, those bounces were very short-lived. In fact, it was the opposite of yesterday, where the market was down early and rallied the second half of the day. All in all, this just hammers home how choppy things have been recently. Against this backdrop, the Dow Jones Industrial Average (DJI) took out its all-time closing high in intraday action, but had pared a healthy portion of its gains by the close.

Continue reading for more on today's market, including:

Trading Topic of the Week -- Ways to Win with Aggressive Trades: Keep holding periods brief. This is one scenario where patience isn't a virtue -- to preserve capital, act quickly to shut down underperforming trades.

The Dow Jones Industrial Average (DJI - 16,550.97) toppled its April 30 all-time closing high in midday action, but settled below this threshold, gaining just 32.4 points, or 0.2%. At its high-water mark, the blue-chip index was in the black by nearly 105 points. Pacing the Dow's 18 advancing names was AT&T Inc. (NYSE:T), which gained 1.8%. For the third time running, Merck & Co., Inc. (NYSE:MRK) brought up the rear, shedding 1.8%.

The S&P 500 Index (SPX - 1,875.63) spent most of the first half of the day in positive territory -- hitting an intraday peak of 1,889.07, but unraveled into the close, settling off 2.6 points, or 0.1%. Underperforming once again was the tech-rich Nasdaq Composite (COMP - 4,051.50), which fell 16.2 points, or 0.4%.

The CBOE Volatility Index (VIX - 13.43) spent time on both sides of the flat line before closing marginally higher, up 0.03 point, or 0.2%.



A Trader's Take:

"What sparked today's selling seemed to be a poorly received 30-year bond auction around 1 p.m. ET," noted Detrick. "Bonds took a big hit, and with that brought a good deal of afternoon volatility. This had many scratching their heads, as bond prices and stocks both traded the same way the final few hours -- lower. Add it all up, and many market participants are stumped by what is happening. One hour, a big S&P 500 breakout looks imminent, then by the end of the day, stocks have sold off hard. Or we've seen some big dips early, only to be bought. The bulls and bears continue to fight to a near dead heat when you look at the S&P 500 and Dow, but under the surface, small-caps continue to fire a potential warning sign as they keep dropping."

5 Items on Our Radar Today:

  1. Export and import activity in China rose unexpectedly last month, temporarily quieting concerns about an impending slowdown in the world's second-largest economy. Specifically, overseas shipments ticked up 0.9% from a year ago, while import activity grew by 0.8%, for a trade surplus of $18.46 billion. In other news from around the globe, European Central Bank head Mario Draghi alluded to the possibility of a change in policy, in order to help combat low inflation. (Bloomberg; BBC News)
  2. After rising for three consecutive weeks, initial jobless claims retreated by a steeper-than-expected 26,000 to 319,000 last week, the Labor Department reported. The smoother four-week average edged 4,500 higher last week to 324,750. (Los Angeles Times)
  3. Why today was a good day for recent Keurig Green Mountain Inc (NASDAQ:GMCR) speculators.
  4. AT&T Inc. (NYSE:T) call buyers defied recent trends by scooping up short-term bullish bets.
  5. Option Trends: Bullish speculation is at a historical high on Walgreen Co (NYSE:WAG), while the bears have dominated recent trading in Herbalife Ltd.'s (NYSE:HLF) options pits.

For a look at today's options movers and commodities activity, head to page 2.

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