SAN FRANCISCO -- A trend! A trend! My kingdom for a trend!
After a week in which stocks repeatedly lurched between dreadful and hopeful, investors are understandably feeling a bit like Richard III. But it's still an open question whether those who are long stocks can avoid the fate that befell Shakespeare's doomed king.
The trend of trendlessness trading left the
Dow Jones Industrial Average
up 0.4% for the week, the
down 0.4% and the
Friday provided an apt ending to the week, as early indications of a big decline were belied by the session's relatively modest losses. After trading as low as 10,529.25, the Dow closed down 0.3% to 10,576.65. Similarly, the S&P closed down 0.3% to 1210.86 after trading as low as 1206.95, while the Comp slid 0.8% to 2029.37 vs. an intraday low of 2009.56.
The week was dominated by a slew of earnings from some of corporate American's biggest names and the midweek testimony of
Stock fell Monday in what some called a "natural" occurrence after last week's rally. The downturn was aided by cautious comments from
The selling continued early Tuesday in the wake of disappointing earnings and/or future guidance from
Johnson & Johnson
, and financial giants
But the weakness abruptly halted midday, concurrent with some positive comments from
Some observers questioned the market's seemingly
schizophrenic state, as investors were nearly panicked one day by negative comments from one chip equipment maker, and then uplifted the next by positive comments from another. Other observers noted major indices bounced from right around
critical support levels, namely 1200 on the S&P 500 and 2000 for the Comp.
As was the case Tuesday, it occurred again Wednesday. Major averages closed down on the session, but were up from intraday lows amid the parsing of
Bond traders certainly liked what the chairman had to say, particularly his message that
inflation remains contained (despite a higher-than-expected
report) and that the "risks would seem to remain mostly tilted toward weakness in the economy."
In the past, such comments would have enlivened equity traders, given Greenspan's inclination for more Fed rate cuts if conditions warrant. The chairman certainly left open the possibility for more easing, but also indicated that the Fed has "shifted gears from a proactive to a reactive stance," as Bondtalk.com commented.
A stronger-than-expected report on the
index of leading economic indicators
Thursday seemed to support Greenspan's contention that the economy is at least forming a bottom, if not already there. That sentiment, plus some cautiously optimistic comments from
, led to solid early gains for major averages.
But the market's indecisiveness reappeared as the averages failed to sustain the early gains. News after the bell Thursday from
confirmed investors' caution, and set the stage for Friday's early losses.
Dons at 20 Paces
The market's vacillations this week provided fodder for those in both the bullish and bearish camps.
For those more optimistic, such as Don Hays of Hays Advisory Group in Nashville, Tenn., the market's ability to digest bad news and maintain key support levels was encouraging.
"The reaction in this news environment should provide valuable clues as to the momentum of the upcoming market," Hays commented. "Looking at the charts, you will see the 'bounce' patterns are very much intact. That bounce has only begun."
But those with a more cynical view also took solace in the week's action.
"The Comp is struggling to stay above" key support levels, commented Don Coxe, chairman and chief strategist for BMO Harris Investment Management in Chicago. Price-to-earnings ratios are "still at alarming levels and there's a lot more bad news to come. We haven't changed our opinion about
the Comp retesting its lows" sometime this year.
Coxe, who made a similar forecast here on
June 22, suggested investors "use rallies in tech to lighten up." He advised investors increase their exposure to energy stocks while conceding "it has not been a good year for those who followed my advice to stay in the
Continuing the theme of "dueling Dons," Hays recommended investors underweight energy stocks, believing "the message of the market" is that a significant change in trend has occurred for the sector.
Many energy stocks hit 52-week lows early in the week, culminating a six-week selloff in the sector. But the group advanced as the week progressed, and again Friday amid expectations
will soon announce some production cutbacks. Hopes for policy initiatives to spur the global economy will emerge from the violence-marred G-8 meeting in Genoa, Italy, also aided energy stocks.
As with the overall market, there are a lot of moving parts in the energy sector that must come together for the group to enjoy a meaningful advance.
Given the market's penchant for frustrating as many participants as possible, it's likely major averages will remain
range-bound for the foreseeable future. As was the case this week, such action will prove vexing for those still looking for a summer rally, but also will stymie those expecting a more Draconian outcome.
Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to
Aaron L. Task.