Earnings season had a decent start last night with the AA earnings beating estimates. While the stock was down today on valuation concerns, the good report kept the tone positive in the overall market. Trading was rather quiet for a second day. 

The euro rebounded overnight after Japan announced it would come to the rescue by purchasing European debt. A lower dollar coupled with strong European sessions sent our major indexes higher in the morning. The snow and ice storm sweeping across the eastern part of the country sent the price of crude oil above $90 per barrel and the energy shares flying but hurt the airline stocks. There was little momentum in the market one way or the other, however. The major indexes took a minor dip in the afternoon but still finished with modest gains. The DJIA closed up 34.43 points (+0.30%) at 11671.88. The S&P 500 gained 4.73 points (+0.37%) to 1274.48 while the NASDAQ finished up 9.03 points (+0.33%) at 2716 despite falling into the red for a brief moment early in the afternoon.

  

Breadth was positive while volume was very light. Advancers led decliners by a 17 to 12 ratio on the NYSE and by an 8 to 5 ratio on the NASDAQ. About 65% of the volume was on the upside on the NYSE while over 55% of the volume was up on the NASDAQ. The February crude futures contract settled up $1.86 at $91.11 per barrel.

  

Today's afternoon dip followed by a quick rebound suggested that there were dip buyers out there ready to jump in. However, be very careful if you follow such a course of action. The light volume indicated that there was no conviction from the big money. There was lots of talk about good earnings from AA but little on the fact that the stock ended lower today. The market is still very extended and while the longer term uptrend looks solidly up, the short term MACDs of the major indexes continue to point lower suggesting near term risk could be to the downside. The market can change quickly during an earnings season. Be careful out there.

  

by Yin Lin, CFA