Stocks Claw Out Of The Red On Friday

Stocks were able to benefit from a couple of factors which stopped the losing streak, which was sparked by Ben Bernanke’s disclosure of the Fed’s quantitative easing phase-out timetable. Friday was a “quadruple witching” day, which marks the quarterly expiration of stock futures, stock options, stock index futures and stock index options. As soon as the “witching hour” began at 3:00, the major stock indices surged, although the Nasdaq was too deeply into the red numbers to make an escape.

The stock market also benefited from a 1:00 blog posting by Ben Bernanke’s de facto “press secretary”, Jon Hilsenrath of The Wall Street Journal, who informed investors that “markets might be misreading the Fed’s messages”. As Mark Twain would have said: “Reports of quantitative easing’s death have been greatly exaggerated”.

The Dow Jones Industrial Average (DIA) picked up 41 points to finish Friday’s trading session at 14,799 for a 0.28 percent advance. The S&P 500 (SPY) rose 0.27 percent to close at 1,592.

The Nasdaq 100 (QQQ) declined 0.43 percent to close at 2,877. The Russell 2000 (IWM) climbed 0.33 percent to close at 963.

In other major markets, oil (USO) fell 1.19 percent to close at $33.23.

On London’s ICE Futures Europe Exchange, July futures for Brent crude oil declined by $1.24 (1.21 percent) to $100.91/bbl. (BNO).

August Gold Futures advanced by $7.00 (0.54 percent) to $1,293.20 per ounce (GLD).

Transports stalled out on Friday, with the Dow Jones Transportation Average (IYT) dropping 0.62 percent.

Yen weakness came back to the rescue of Japanese stocks on Friday. The yen fell as far as 97.87 per dollar during Friday’s trading session in Tokyo. Exporters led the advance on Friday. A weakened yen causes Japanese exports to be more competitively priced in foreign markets (FXY). The Nikkei 225 Stock Average jumped 1.66 percent to 13,230 (EWJ).

The European stock market attempted a rebound on Friday, which ran out of gas as the day continued. Once the bargain hunters accomplished their mission during the first half of the session, all of the major European stock indices began to fade (VGK).

The Euro STOXX 50 Index finished Friday’s trading session with a 1.43 percent drop to 2,549 – remaining below its 200-day moving average of 2,633. Its Relative Strength Index is 28.52 (FEZ). The drop in the RSI below 30 is considered an “oversold” signal, possibly explaining the bargain hunting which took place earlier in the session. Nevertheless, a “head-and-shoulders” pattern has appeared on the chart, suggesting a continued selloff. The STOXX 50 is now far below its 200-day moving average and Friday marked its lowest closing level for 2013.

In China, stocks were able to pare their losses from an early decline with the help of rumors that the People’s Bank of China provided some overdue liquidity injections to major banks which have been unfairly impacted by the PBOC’s credit squeeze. The PBOC is attempting to get control over the nation’s shadow banking system, which has been notoriously reckless in its lending practices. The Shanghai Composite Index declined 0.50 percent to 2,073 (FXI). Hong Kong’s Hang Seng Index fell 0.59 percent to 20,263 (EWH).

Technical indicators reveal that despite Friday’s slight advance, the S&P 500 finished a second consecutive session below its 50-day moving average of 1,618 after closing at 1,592. Bears are anticipating a further decline to the 200-day moving average of 1506. The S&P has not closed this low since May 2. Its Relative Strength Index rose from 30.12 to 40.81. The MACD remains below the signal line and has crossed far below the zero line to negative 3.9, suggesting the likelihood of a continued decline.

For the day, most sectors were in positive territory, with the consumer staples and utilities sectors taking the lead by posting gains of 1.34 percent and 1.33 percent, respectively. The technology sector took the hardest hit, declining 0.59 percent.

Consumer Discretionary (XLY): +0.21%

Technology: (XLK): -0.59%

Industrials (XLI): +0.07%

Materials: (XLB): -0.35%

Energy (XLE): +0.18%

Financials: (XLF): +0.10%

Utilities (XLU): +1.33%

Health Care: (XLV): +0.99%

Consumer Staples (XLP): +1.34%

Bottom line: The Dow and the S&P 500 were able to finish Friday’s trading session in positive territory after the day began with bargain hunting and ended with quadruple witching.

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