Stock market outlook remains worrisome

Friday's Index Wrap-up

The Dow Jones Industrial Average ($DJI) ended the day on Friday with a loss of 2.42 points, or 0.02%, and closed at 11,866.39. The top performers were Home Depot (HD) (+2.54%), Microsoft (MSFT) (+1.72%), General Electric (GE) (+1.31%), and Chevron (CVX) (+1.19%). The weakest were IBM (IBM) (-2.09%), United Technologies (UTX) (-1.55%), and Hewlett-Packard (HPQ) (-1.22%). The week ended lower by 2.61%, but remains higher by 2.5% for the year-to-date.

The S&P 500 ($SPX) finished the session with a gain of 3.91 points, or 0.32%, and closed at 1,219.66. The strongest individual percentage performers in the index were Adobe Sys. (ADBE) (+6.58%), Cameron International Corp. (CAM) (+6.00%), Masco Corp. (MAS) (+5.29%), and Discover Financial Services (DFS) (+5.03%). The weakest were Cablevision Sys. (CVC) (-8.47%), Sears Holdings Corp. (SHLD) (-8.36%), and Accenture Plc. (ACN) (-3.53%). The index ended the week lower by 2.83% and is now off 3.02% year-to-date.

The Nasdaq Composite ($COMPX) ended the session higher by 14.32 points, or 0.56%, on Friday and it closed at 2,555.33. The top index components in the Nasdaq-100 ($NDX) were Vertex Pharmaceuticals (VRTX) (+7.89%), Adobe Systems (ADBE) (+6.58%), and Alexion Pharmaceuticals (ALXN) (+4.24%). The weakest were Research In Motion (RIMM) (-11.17%), Sears Holdings Corp. (SHLD) (-8.36%), and Gilead Sciences (GILD) (-3.46%). Research In Motion (RIMM) beat earnings expectations for its fiscal third-quarter, but offered a disappointing outlook and announced that its next generation of BlackBerries won't be available for nearly a year. The Nasdaq Composite ($COMPX) is of 3.68% year-to-date after a weekly loss of 3.46%.

S&P 500 (Figure 2)

We've been following the daily and weekly resistance zone in the market for awhile now. Since first hitting back in mid-October, the indices have fallen into a period of congestion on the monthly time frame. Because the selloff in November held the upper 2/3 of the previous rally and the recovery returned to the zone of prior highs in December, the congestion thus far has remained outwardly bullish. Nevertheless, there is plenty of room for concern.

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