Volume sunk to the lowest level of the year, but this could change if some of the big caps exceed estimates

Even though Monday turned out to be the fifth consecutive day of gains, it didn’t feel like a market that was headed higher. Perhaps it is the pause before Q2 earnings begin to pour in, or maybe after eight days down and five up investors are tired of the roller coaster. Both the NYSE and the Nasdaq traded less shares than on Friday, which was the lowest volume of the year until yesterday.

After spending most of the morning in minus territory, the Dow Industrials managed to break even at noon, but then trudged on to the close and a slight gain. Despite the overall lethargy, big-cap technology stocks were the beneficiary of analysts’ upgrades. Microsoft Corporation (NASDAQ: MSFT), SanDisk Corporation (NASDAQ: SNDK), and QUALCOMM, Inc. (NASDAQ: QCOM) benefitted from the attention. But the tech-heavy Nasdaq only rose by 0.9%.

And there was speculation that BP plc (NYSE: BP) or a substantial portion of it would be sold off to pay for the billions of dollars of losses incurred from the Gulf of Mexico crisis. Exxon Mobil Corporation (NYSE: XOM) was rumored to be a beneficiary of some of the pieces of BP, and Apache Corporation (NYSE: APA) was named by the Wall Street Journal as a buyer of up to $10 billion of BP’s assets.

At the close, the Dow Jones Industrial Average rose 18 points to 10,216, the S&P 500 gained under a point to 1,079, and the Nasdaq rose 2 points to 2,198.�

The NYSE traded 855 million shares with decliners over advancers by 1.7-to-1. The Nasdaq crossed 510 million shares and decliners there were ahead by 2.3-to-1.

Crude oil for August delivery fell $1.14 to $74.95 a barrel, and the Energy Select Sector SPDR (NYSE: XLE) lost 14 cents, closing at $52.48.�

August gold was hit with an $11.10 decline, closing at $1,198.70 an ounce, and the PHLX Gold/Silver S! ector In dex (NASDAQ: XAU) fell $1.36 to $173.73. The XAU has been hugging its 200-day moving average since February while recently in a trading range of $170 to $190. Its stochastic issued a buy signal yesterday.

What the Markets Are Saying

While everyone waits for the Q2 reports, market leadership has remained absent except for a minor run on utility stocks — the most defensive of all sectors and a discouragement for the bulls. To put it another way, looking to utilities for leadership would be about as weak as Barney Fife leading the charge up San Juan Hill.

Volume for the last two days has sunk to the lowest level of the year. This could change if some of the big caps exceed both earnings and revenue estimates. But following a rebound after a head-and-shoulders break the pattern of low volume is consistent with a faltering recovery.�

The big number to watch is the resistance zone around the S&P 500′s 1,100 area. That zone contains the primary bearish resistance line and the 50- and 200-day moving averages now at 1,094 and 1,112.�

The second quarter’s earnings started with Alcoa Inc.’s (NYSE: AA) report last night. The stock modestly exceeded analysts’ estimates for both earnings and revenues. Now let’s see what the bulls can do with it.

Today’s Trading Landscape

Earnings to be reported before the opening include: Fastenal, Hi-Tech Pharmacal and Infosys.

Earnings to be reported after the close include: AAR Corp., Adtran, Intel and YUM! Brands.

Economic reports due: NFIB small business optimism, ICSC-Goldman Sachs store sales, international trade (the consensus expects -$39 billion), Redbook and Treasury budget (the consensus expects -$70 billion).

If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.

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