4 Tips to Keep You Alive in This Market

Momentum from last week’s outstanding second-quarter earnings carried over into Monday as buyers continued to peck away at blue chips. And following a jump in new home sales, buyers moved into thinly traded issues in the building stocks.

A spike of 24% month-over-month in new home sales was unexpected. Estimates called for a gain of 310,000 units, and instead the June count came in at 330,000 units.�

So far nearly half of the companies in the S&P 500 have reported earnings. Almost 73% have beat analysts’ estimates according to S&P, according to the Wall Street Journal.

Sprint Nextel Corporation (NYSE: S) jumped 7.7% following a government decision that owners of Apple Inc.’s (NASDAQ: AAPL) iPhone will be allowed to use the new phone on rival networks. AAPL fell slightly on the news.

BP plc (NYSE: BP) rose 4.9% on speculation that Tony Hayward, the current CEO, would be replaced by Robert Dudley. There was no comment from BP on the issue.

The euro was strong climbing 0.7% against the U.S. dollar, closing at $1.30.

At the close, the Dow Jones Industrial Average was up 101 points to 10,525, the S&P 500 gained 12 points to 1,115, and the Nasdaq rose 27 points to 2,296.�

The NYSE traded just over 1 billion shares with advancers over decliners by 3.7-to-1. On the Nasdaq, advancers were ahead by just over 3-to-1 on volume of 600 million shares.

Crude oil for September delivery was unchanged at $78.98 a barrel, and the Energy Select Sector SPDR (NYSE: XLE) rose 47 cents to $54.25.

Gold for December delivery (most active contract) fell $4.70 to $1,183 an ounce as investors sought more aggressive investments. The PHLX Gold/Silver Sector Index (NASDAQ: XAU) fell 1.6 points to 171.82.

What the Markets Are Saying

On yesterday’s close, both the Dow and Nasdaq broke above their 200-day moving average and bearish resistance line, as well as their 2009 closes. This not only puts them in positive territory for the year, but at the very least changes their near-term trends to up and intermediate-term trends to sideways (pending a successful test of the prior low).

The most influential index is the S&P 500 for two reasons: It is the most-watched index of the professional investors, and it has the broadest stock and sector coverage of any other index.

Until yesterday, the S&P 500 had not yet exceeded its 200-day moving average, which is at 1,113.82, but with yesterday’s close at 1,115.01, it has moved above it by 1.19 points. Its 2009 close was at 1,115.10! And its 50% retracement number is at 1,121 � this makes any change in trend for the S&P 500 just too close to call. Also, 1,100 to 1,120 has been a major resistance/support zone for over a year, and the index is now in the middle of that zone. The S&P 500 is close to turning up, but has not yet confirmed it.

This is clearly one of those times when I wish I had taken up plumbing or some other more exact science than technical analysis. The past two weeks have been very challenging. But here is the way I see it:� The momentum has shifted to the bulls as barrier after barrier has fallen, and now the last hope of the bears is that the S&P 500 will reverse following a 10% bounce from its low of July 1 — just over three weeks ago. So far this major index has failed to keep up with its cousins, and if it fails now, it would signal a “non-confirmation” against the other major indices.�

There are many examples of bear market bounces that exceeded 10% and even more. And we don’t have to go back any farther than December 2007 to see a bounce in the S&P after a major top. That was an 8.25% bounce that penetrated both the 50- and 200-day moving averages before falling to new lows. And following that decline, the index rallied again — this time from 1,257 in March 2008 to a high in May of 1,440, a gain of 14.5%, during which it penetrated all major moving averages, as well as the primary bearish resistance line. The bulls were bellowing that the overall trend had changed, but just as volume began to pick up for the bulls, the market reversed again, and by March 2009, it had fallen by more than 50% to 667.

The meek volume of the current rally is much like the rallies of 2007 and 2008, which ended in disaster for the bulls. Am I able to guarantee that the market will not move higher? Of course not. But if “the past is prologue,” then the bulls have much to be concerned about and had better keep a watchful eye in their rear-view mirror because the bear is not yet dead.�

A side note: If you are trading the stock market, follow these four solid rules that will protect you from your emotions:

1. Use stop losses on all day trading positions and take your gain when the position reaches your target. Don’t overreach.

2. If you are day trading, take a position for no more than two days.

3. Don’t be afraid to take small losses — they protect you from the big ones.

4. Finally, don’t risk more than you can afford to lose.�

Today’s Trading Landscape

Earnings to be reported before the opening include: A.M. Castle, Affiliated Managers, AGCO Corp., AK Steel, American Ecology Corp., AmerisourceBergen, Ametek, Anixter, Asbury Automotive, BE Aerospace, Bemis, BP, Capella Education, Carlisle Companies, CBIZ, Centene, Ceradyne, CGI Group, CIT Group, Cobalt International Energy, Corn Products, Cummins, Cynosure, Diamondrock Hospitality, Dice Holdings, Domino’s Pizza, DuPont, EarthLink, Ecolab, Energizer, Entegris, FirstMerit Corp., Group 1 Auto, Heidrick & Struggles, ICON plc, Iconix Brand, Imation, KC Southern, Kinetic Concepts, L.B. Foster Co., L-3 Communications, LCA Vision, Lennox International, Level 3, Lexmark, Lincoln Electric, Lockheed Martin, NASDAQ, Occidental Petroleum, Office Depot, OptionsXpress, Patriot Coal, PrivateBanCorp., Radware, Regions Financial, Rimage, Rockwood Holdings, SAP AG, Signature Bank, Sun Communities, Supervalu, Talisman Energy, TASER, Tellabs, Temple-Inland, Teva Pharmaceutical, The Inventure Group, Thermo Fisher, U.S. Steel, Umpqua Holdings, Under Armour, Valero Energy, VASCO Data Security, Wabtec, Western Union, Whitney Holding, World Acceptance and Wright Express.

Earnings to be reported after the close include: ACE Limited, Aetna, AFLAC, Aftermarket Tech, American Campus Communities, Arthur J. Gallagher, B&G Foods, Basic Energy Services, Blackbaud, Boston Properties, Broadcom, Buffalo Wild Wings, C.H. Robinson, CB Richard Ellis, CB&I, Century Aluminum, Cephalon, Charm Communications, Choice Hotels, Compass Minerals International, CSG Systems, Delphi Financial, Dreamworks Animation, DST Systems, East West Banc, EastGroup, eHealth, Endurance Specialty, Entercom, EPIQ Systems, Euronet, Fiserv, FormFactor, Global Payment, Hanger Orthopedic, Hawaiian Holdings, Hutchinson, Illumina, InterMune, International Game Technology, JDA Software, Jones Lang LaSalle, Keynote Systems, Kimco Realty, Kona Grill, Las Vegas Sands, Manitowoc, Massey Energy, Nabors Industries, NalCo., National Instruments, New Alliance Bancshares, Norfolk Southern, NuVasive, Panera Bread, PPD, Questar, RadiSys, RenaissanceRe, RF Micro Device, Rocky Brands, Safe Bulkers, Silicon Image, Sterling Financial, Sunoco Logistics, Supertex, Taubman Centers, Trimble Navigation, Trustmark, Ultimate Software, USANA, VisionChina Media, Websense and Zix Corp.

Economic reports due: ICSC-Goldman Store Sachs store sales, Redbook, S&P Case-Shiller home price index, consumer confidence (the consensus expects 51), State Street Investor Confidence Index.

If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.

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