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Double Bottom
Sounds kind of dirty, right? Actually, it's because of a clean visual that technical analysts use this term. Technical analysts like charts (hence their nickname of "chartists"), and they like to give certain patterns they see neat little names.
Such is the case with the double bottom, which looks on a chart like, well, a double bottom. Think of three mountains (on a chart reflecting a rise in values) separated by two valleys (representing dips in value). The troughs of the valleys, and the size of the first two peaks, are generally the same, so the chart looks like the letter 'W.' The appearance of those two valleys represents a double bottom.
So what? Well, if you're one of those folks who believes in the power of the charts, seeing a double bottom suggests a long-term trend is about to reverse. So, if a stock chart shows shares falling for several months, then seeing a double bottom, chances are good (according to the chartists) that the shares will rise. And vice versa.
But, beware: charts can be a great tool, but they're more art than science. Use any charts with caution.
Home / Markets
Friday, March 28, 2008
Uptick
Late-Week Slide: 3 Days of Red on Wall Street
Matt Egan
FOXBusiness
Stocks sank today, failing to rebound from consecutive triple-digit losses on the Dow. Wall Street continued to worry about
the downward trend in the U.S. economy, especially given new evidence today that bolstered fears of a consumer struggling
to stay afloat.
Today’s Market
The Dow Jones Industrial Average fell 86.06 points, or 0.70% to 12216.40, the Standard & Poor’s 500 index declined 10.54 points, or 0.80% to 1315.22 and the Nasdaq Composite Index dropped 19.65 points, or 0.86%, to 2261.18. The consumer-friendly Fox 50 fell 7.33 points, or 0.77%, to 946.49.
Stocks closed the day near the lowest levels of the session as the market lacked a clear positive catalyst providing a reason to buy stocks. Today's losses mean the blue-chip index has fallen approximately 300 points over the past three days. This comes just a week after many on Wall Street hoped the market had "found a bottom" and would begin to start to trend higher.
Also, this week's losses mean that March, which had been a relatively decent month for Wall Street (relatively being the operative word), is now in position to finish negative. If stocks fail to rally on Monday, the final trading day of the month, the S&P 500 will close with its fifth straight monthly loss -- the first time that would have happened since October 1990.
Aside from a 2% gain from aluminum maker Alcoa (AA), the blue-chip stocks failed to advance significantly. The index was led lower by a near-4% decline from Citigroup (C) and a 3% fall from American Express (AXP). Citi and other financials fell after an influential analyst predicted several banks will be forced to cut their dividends further to preserve capital. Today's late-day slide erased gains of as much as 75 points on the Dow this morning.
Consumer discretionary stocks, namely retailers like Best Buy (BBY), performed the worst today after J.C. Penney (JCP) issued a profit warning.
The Nasdaq Composite fell slightly further than the broader market, led by a 27% plunge from education company Apollo (APOL). On the other hand, the index saw solid gains from pharmaceutical company Sepracor (SEPR) and Blackberry-maker Research in Motion (RIMM).
Wall Street received economic data prior to the opening bell that was better-than-expected but also signaled trouble ahead for the economy. The Commerce Department said personal spending increased by a meager 0.1% in February -- the worst performance in 17 months. Also, the government said personal income increased by 0.5% in February, a welcome sign given some weakness in the job market.
The spending data is likely to cause concern about the economy because when inflation is removed, consumer spending was basically flat. For Wall Street, the consumer is tantamount to the 800-pound gorilla in the U.S. economy as consumer spending accounts for more than two-thirds of the nation’s gross domestic product. However, spending has slowed significantly in recent months amid falling home values, high energy prices, more elusive credit and gloomy economic headlines.
"The sharp drop in personal consumption spending in February points to a very weak -- perhaps negative -- report on Gross Domestic Product for the first quarter," said FOX Business economist Mark Lieberman. A recession, which many on Wall Street worry the economy could already be in, is typically defined as two consecutive quarters of negative growth. During the fourth quarter of 2007, GDP increased a tiny 0.6%, sharply down from a jump of 4.9% in the third quarter.
Another number that doesn't bode well for those worried about the health of the consumer is the University of Michigan’s consumer sentiment survey, which came in at the lowest level since February 1992. The index declined to 69.5 in March, which is lower than the 70.0 reading the market had been expecting and down from February's 70.8 indication.
The bearish tone on Wall Street was set prior to the opening bell after J.C. Penney (JCP) slashed its first-quarter profit forecast to 50 cents per share from an earlier estimate of between 75 cents and 80 cents per share. The stock slid 7.5% to a two-month low on the news as Wall Street had been expecting the retailer to earn 75 cents per share.
"J.C. Penney counts half of American families as its customers, and they are feeling macro-economic pressures from many areas, including higher energy costs, deteriorating employment trends and significant issues in the housing and credit markets," Myron Ullman III, chairman and CEO of J.C. Penny said in a press release. Ullman said he expects “the difficult environment” to continue over the course of 2008.
Shares of other major retailers like Sears (SHLD) and Target (TGT) closed in negative territory on the J.C. Penney warning.
“The consumer is not spending. They are starting to repair their balance sheets, which is a good thing [for them]. But that is not going to be good for economic growth if we are not spending money," said Paul Nolte, director of investments at Hinsdale Associates.
While the retailers give a better picture of the broader economy, in many ways it's the financials that Wall Street has been most worried about after the dramatic collapse of Bear Stearns (BSC).
Lehman Brothers (LEH), the financial company that plunged 10% on market chatter yesterday, received a reprieve today care of an analyst at Citigroup (C). The stock was upgraded to "buy" by Citi, which argued that Lehman does not have, nor will have in the near future, a liquidity crisis similar to what Bear Stearns had. Despite the vote of confidence, shares of Lehman closed 2.5% lower -- a negative development for Wall Street. During yesterday's fall, the Dow moved in tandem with Lehman Brothers, reflecting the level of concern the market has had with the company.
Meanwhile, the Federal Reserve announced today it plans to continue its moves aimed at thawing the ongoing credit freeze. The Fed said it will lend another $100 billion in April to banks through auctions on April 7 and April 21.
Oil and gold futures pulled back today after the dollar strengthened and worries about an Iraqi oil pipeline dissipated. Oil fell $1.96 to end at $105.62 a barrel in New York. Gold tumbled $18.20 to close at $930.60 an ounce.
Corporate Movers
Northwest Airlines' (NWA) proposed merger with Delta Airlines (DAL) could still get done, The Wall Street Journal reported today. Northwest suggested the two sides move ahead with talks to join forces -- but this time with less generous terms for the pilots, the Journal reported. A previous deal, which would have made the combined company the world's largest airline and kept the Delta name, crumbled after the two airlines tried to get their respective pilot unions to sign off on the agreement.
Clear Channel (CCU), the radio station operator that has a $19.5 billion deal to go private, warned in an SEC filing today its deal may not close due to a lack of funding. The company announced what had already been reported by The Wall Street Journal and others: the consortium of banks which had signed off on the deal months ago, are now balking at the price tag given the ongoing credit freeze. Clear Channel, which pared earlier large losses to close 1% lower, said private-equity firms Bain Capital and Thomas H. Lee told the company it won't be able to go forward due to a failure to receive funding.
Bear Stearns (BSC) declined a day after news broke that the bank's chairman, Jimmy Cayne, sold his entire 5.6 million-share stake in the company at $10.84 a share, according to the Securities & Exchange Commission. Selling his stake at $10.84 gives a sign to the market that company insiders do not believe that Bear will sell for more than JPMorgan Chase's (JPM) recently-upped $10 per share offer price. Not too long ago, Bear Stearns, which was the fifth largest Wall Street investment bank, was trading for $170 per share. Shares of Bear closed 5% lower today on the news.
KB Home (KBH) slid 5% today after the large homebuilder disclosed a $268.2 million loss in the first quarter amid the ongoing housing slump. Revenue plunged 43% to $794.2 million in the first quarter and the company said it still sees near-term weakness in the housing market. Shares of some other homebuilders like Hovnanian (HOV) declined on the news.
Citigroup (C) and Wachovia (WB) are likely to announce dividend cuts next month because the economy and the banks' poor balance sheets will make it hard for them to keep up with their current dividend plans, influential Oppenheimer analyst Meredith Whitney wrote in a research note today. Whitney correctly predicted Citi would be forced to slash its dividend two months before it did so in January.
Red Hat (RHT) closed 5% higher but failed to be a positive catalyst for tech stocks. The maker of the Linux operating system reported it earned 20 cents per share excluding one-time items, topping mean estimates from Thomson Financial of 19 cents per share.
Legg Mason (LM) fell 3% despite attempts to reassure the market this morning, saying it continues to explore potential solutions to restore liquidity in the market for auction rate securities. The company said there is no guarantee it will find a solution to make it easier to trade these securities, which are issued by municipalities, tax-exempt institutions and closed-end funds. Shareholders have had great difficulty unloading these securities due to "broader economic conditions and continued severe dislocations in the credit markets," Legg Mason said in a statement.
Aetna (AET), Cigna (CI) and shares of other healthcare companies were under pressure from profit estimates by an analyst at Lehman Brothers today. The analyst, Joshua Raskin, cited a continued downward trend for managed care companies, volatile trading due to guidance revisions, a heavy flu season and other reasons.
Apollo Group (APOL) plunged 27% to a new 13-month low today after its fiscal second-quarter results missed expectations. The for-profit education company blamed its results on higher expenses. Apollo, which owns the University of Phoenix, posted adjusted-earnings of 41 cents per share yesterday, 10 cents below mean analyst estimates from Thomson Financial. An analyst at Stifel Nicolaus lowered the stock's price target to $66 from $84 today.
Research in Motion (RIMM), the maker of the popular Blackberry device, rose 3% today after the stock's price target was raised by two analysts. RBC Capital upped RIM's price target from $140 to $150. An analyst at Piper Jaffray raised the stock's target to $117 from $112.
Office Depot (ODP) stumbled today, down 3.5% on news of a proxy battle beginning at the retailer. A group of shareholders, led by homebuilder Levitt (LEV) and private-equity firm Woodbridge Equity Fund, officially launched the effort to have Mark Begelman and Martin Hanaka elected to Office Depot's board of directors. Bagelman is the former president and COO of Office Depot and Hanaka used to be the CEO of Sports Authority.
Chico's (CHS) declined 9% after analysts at Merrill Lynch (MER) cut the stock to "sell" from "neutral."
World Markets
European markets closed with modest losses. The Dow Jones Euro Stoxx 50, a index tracking the 50 largest companies of Europe, fell 11.06 points, or 0.30%, to 3641.05. The FTSE 100, London's benchmark index, dropped 24.60 points, or 0.43%, to 5692.90.
France's CAC 40 Index lost 23.61 points, or 0.50%, to 4695.92 and Germany's DAX declined 18.16, or 0.28%, to 6559.90.
Asian markets showed stronger gains. Japan's Nikkei 225 Index rose 215.89 points, or 1.71%, to 12820.47. Hong Kong's Hang Seng Index gained 621.73, or 2.74%, to 23285.95.
Today’s Market
The Dow Jones Industrial Average fell 86.06 points, or 0.70% to 12216.40, the Standard & Poor’s 500 index declined 10.54 points, or 0.80% to 1315.22 and the Nasdaq Composite Index dropped 19.65 points, or 0.86%, to 2261.18. The consumer-friendly Fox 50 fell 7.33 points, or 0.77%, to 946.49.
Stocks closed the day near the lowest levels of the session as the market lacked a clear positive catalyst providing a reason to buy stocks. Today's losses mean the blue-chip index has fallen approximately 300 points over the past three days. This comes just a week after many on Wall Street hoped the market had "found a bottom" and would begin to start to trend higher.
Also, this week's losses mean that March, which had been a relatively decent month for Wall Street (relatively being the operative word), is now in position to finish negative. If stocks fail to rally on Monday, the final trading day of the month, the S&P 500 will close with its fifth straight monthly loss -- the first time that would have happened since October 1990.
Aside from a 2% gain from aluminum maker Alcoa (AA), the blue-chip stocks failed to advance significantly. The index was led lower by a near-4% decline from Citigroup (C) and a 3% fall from American Express (AXP). Citi and other financials fell after an influential analyst predicted several banks will be forced to cut their dividends further to preserve capital. Today's late-day slide erased gains of as much as 75 points on the Dow this morning.
Consumer discretionary stocks, namely retailers like Best Buy (BBY), performed the worst today after J.C. Penney (JCP) issued a profit warning.
The Nasdaq Composite fell slightly further than the broader market, led by a 27% plunge from education company Apollo (APOL). On the other hand, the index saw solid gains from pharmaceutical company Sepracor (SEPR) and Blackberry-maker Research in Motion (RIMM).
Wall Street received economic data prior to the opening bell that was better-than-expected but also signaled trouble ahead for the economy. The Commerce Department said personal spending increased by a meager 0.1% in February -- the worst performance in 17 months. Also, the government said personal income increased by 0.5% in February, a welcome sign given some weakness in the job market.
The spending data is likely to cause concern about the economy because when inflation is removed, consumer spending was basically flat. For Wall Street, the consumer is tantamount to the 800-pound gorilla in the U.S. economy as consumer spending accounts for more than two-thirds of the nation’s gross domestic product. However, spending has slowed significantly in recent months amid falling home values, high energy prices, more elusive credit and gloomy economic headlines.
"The sharp drop in personal consumption spending in February points to a very weak -- perhaps negative -- report on Gross Domestic Product for the first quarter," said FOX Business economist Mark Lieberman. A recession, which many on Wall Street worry the economy could already be in, is typically defined as two consecutive quarters of negative growth. During the fourth quarter of 2007, GDP increased a tiny 0.6%, sharply down from a jump of 4.9% in the third quarter.
Another number that doesn't bode well for those worried about the health of the consumer is the University of Michigan’s consumer sentiment survey, which came in at the lowest level since February 1992. The index declined to 69.5 in March, which is lower than the 70.0 reading the market had been expecting and down from February's 70.8 indication.
The bearish tone on Wall Street was set prior to the opening bell after J.C. Penney (JCP) slashed its first-quarter profit forecast to 50 cents per share from an earlier estimate of between 75 cents and 80 cents per share. The stock slid 7.5% to a two-month low on the news as Wall Street had been expecting the retailer to earn 75 cents per share.
"J.C. Penney counts half of American families as its customers, and they are feeling macro-economic pressures from many areas, including higher energy costs, deteriorating employment trends and significant issues in the housing and credit markets," Myron Ullman III, chairman and CEO of J.C. Penny said in a press release. Ullman said he expects “the difficult environment” to continue over the course of 2008.
Shares of other major retailers like Sears (SHLD) and Target (TGT) closed in negative territory on the J.C. Penney warning.
“The consumer is not spending. They are starting to repair their balance sheets, which is a good thing [for them]. But that is not going to be good for economic growth if we are not spending money," said Paul Nolte, director of investments at Hinsdale Associates.
While the retailers give a better picture of the broader economy, in many ways it's the financials that Wall Street has been most worried about after the dramatic collapse of Bear Stearns (BSC).
Lehman Brothers (LEH), the financial company that plunged 10% on market chatter yesterday, received a reprieve today care of an analyst at Citigroup (C). The stock was upgraded to "buy" by Citi, which argued that Lehman does not have, nor will have in the near future, a liquidity crisis similar to what Bear Stearns had. Despite the vote of confidence, shares of Lehman closed 2.5% lower -- a negative development for Wall Street. During yesterday's fall, the Dow moved in tandem with Lehman Brothers, reflecting the level of concern the market has had with the company.
Meanwhile, the Federal Reserve announced today it plans to continue its moves aimed at thawing the ongoing credit freeze. The Fed said it will lend another $100 billion in April to banks through auctions on April 7 and April 21.
Oil and gold futures pulled back today after the dollar strengthened and worries about an Iraqi oil pipeline dissipated. Oil fell $1.96 to end at $105.62 a barrel in New York. Gold tumbled $18.20 to close at $930.60 an ounce.
Corporate Movers
Northwest Airlines' (NWA) proposed merger with Delta Airlines (DAL) could still get done, The Wall Street Journal reported today. Northwest suggested the two sides move ahead with talks to join forces -- but this time with less generous terms for the pilots, the Journal reported. A previous deal, which would have made the combined company the world's largest airline and kept the Delta name, crumbled after the two airlines tried to get their respective pilot unions to sign off on the agreement.
Clear Channel (CCU), the radio station operator that has a $19.5 billion deal to go private, warned in an SEC filing today its deal may not close due to a lack of funding. The company announced what had already been reported by The Wall Street Journal and others: the consortium of banks which had signed off on the deal months ago, are now balking at the price tag given the ongoing credit freeze. Clear Channel, which pared earlier large losses to close 1% lower, said private-equity firms Bain Capital and Thomas H. Lee told the company it won't be able to go forward due to a failure to receive funding.
Bear Stearns (BSC) declined a day after news broke that the bank's chairman, Jimmy Cayne, sold his entire 5.6 million-share stake in the company at $10.84 a share, according to the Securities & Exchange Commission. Selling his stake at $10.84 gives a sign to the market that company insiders do not believe that Bear will sell for more than JPMorgan Chase's (JPM) recently-upped $10 per share offer price. Not too long ago, Bear Stearns, which was the fifth largest Wall Street investment bank, was trading for $170 per share. Shares of Bear closed 5% lower today on the news.
KB Home (KBH) slid 5% today after the large homebuilder disclosed a $268.2 million loss in the first quarter amid the ongoing housing slump. Revenue plunged 43% to $794.2 million in the first quarter and the company said it still sees near-term weakness in the housing market. Shares of some other homebuilders like Hovnanian (HOV) declined on the news.
Citigroup (C) and Wachovia (WB) are likely to announce dividend cuts next month because the economy and the banks' poor balance sheets will make it hard for them to keep up with their current dividend plans, influential Oppenheimer analyst Meredith Whitney wrote in a research note today. Whitney correctly predicted Citi would be forced to slash its dividend two months before it did so in January.
Red Hat (RHT) closed 5% higher but failed to be a positive catalyst for tech stocks. The maker of the Linux operating system reported it earned 20 cents per share excluding one-time items, topping mean estimates from Thomson Financial of 19 cents per share.
Legg Mason (LM) fell 3% despite attempts to reassure the market this morning, saying it continues to explore potential solutions to restore liquidity in the market for auction rate securities. The company said there is no guarantee it will find a solution to make it easier to trade these securities, which are issued by municipalities, tax-exempt institutions and closed-end funds. Shareholders have had great difficulty unloading these securities due to "broader economic conditions and continued severe dislocations in the credit markets," Legg Mason said in a statement.
Aetna (AET), Cigna (CI) and shares of other healthcare companies were under pressure from profit estimates by an analyst at Lehman Brothers today. The analyst, Joshua Raskin, cited a continued downward trend for managed care companies, volatile trading due to guidance revisions, a heavy flu season and other reasons.
Apollo Group (APOL) plunged 27% to a new 13-month low today after its fiscal second-quarter results missed expectations. The for-profit education company blamed its results on higher expenses. Apollo, which owns the University of Phoenix, posted adjusted-earnings of 41 cents per share yesterday, 10 cents below mean analyst estimates from Thomson Financial. An analyst at Stifel Nicolaus lowered the stock's price target to $66 from $84 today.
Research in Motion (RIMM), the maker of the popular Blackberry device, rose 3% today after the stock's price target was raised by two analysts. RBC Capital upped RIM's price target from $140 to $150. An analyst at Piper Jaffray raised the stock's target to $117 from $112.
Office Depot (ODP) stumbled today, down 3.5% on news of a proxy battle beginning at the retailer. A group of shareholders, led by homebuilder Levitt (LEV) and private-equity firm Woodbridge Equity Fund, officially launched the effort to have Mark Begelman and Martin Hanaka elected to Office Depot's board of directors. Bagelman is the former president and COO of Office Depot and Hanaka used to be the CEO of Sports Authority.
Chico's (CHS) declined 9% after analysts at Merrill Lynch (MER) cut the stock to "sell" from "neutral."
World Markets
European markets closed with modest losses. The Dow Jones Euro Stoxx 50, a index tracking the 50 largest companies of Europe, fell 11.06 points, or 0.30%, to 3641.05. The FTSE 100, London's benchmark index, dropped 24.60 points, or 0.43%, to 5692.90.
France's CAC 40 Index lost 23.61 points, or 0.50%, to 4695.92 and Germany's DAX declined 18.16, or 0.28%, to 6559.90.
Asian markets showed stronger gains. Japan's Nikkei 225 Index rose 215.89 points, or 1.71%, to 12820.47. Hong Kong's Hang Seng Index gained 621.73, or 2.74%, to 23285.95.
Market Snapshot
| Symbol | Last Price | Netchange | Volume |
|---|---|---|---|
| -- | -- | -- | -- |
| -- | -- | -- | -- |
| -- | -- | -- | -- |
| -- | -- | -- | -- |
| -- | -- | -- | -- |
