Will the markets keep going up this month?

Posted by Eric LeRiche | May 3, 2010 .

The Dow Jones Industrial Average’s (DJIA) eight-week winning streak came to an end last week, as a confluence of weak economic data, Goldman Sachs (GS) fallout, a massive oil spill in the Gulf, and concern over European sovereign debt sent investors running for the sidelines. Still, the bulls claimed a couple small victories, as the DJIA held above the 11,000 level, marking its third consecutive positive monthly close, and the first monthly close above this region since August 2008. Look for support to hold in the area, while short-term resistance may manifest in the 11,150 area. The S&P 500 Index (SPX), meanwhile, is clinging to support in the 1,180 region, with potential resistance at 1,220. There appears to be a positive bias heading into the open, as the DJIA and the SPX are trading 32 points and 3.4 points above fair value, respectively. Finally, the CBOE Market Volatility Index (VIX) soared nearly 20% on Friday, allowing the VIX to close the week above its 10-week and 20-week trendlines for the first time since early February. That said, the fear index is still staring up at its 10-month moving average, which the VIX has not closed a month above since March 2009.

Headlining equity news this morning, Continental Airlines Inc. (CAL) and UAL Corp. (UAUA) announced this morning that they are merging in an all-stock deal. Under terms of the agreement, CAL shareholders will receive 1.05 shares of United common stock for each Continental share they own. United shareholders will own roughly 55% of the combined company. The combined airline behemoth is expecting annual cost savings of $1 billion to $1.2 billion by 2013. Jeff Smisek, Continental’s CEO, will head the combined company, while Glen Tilton, CEO of UAL, will serve as a non-executive chairman. The newly merged company will operate under the United Airlines name and the marketing brand will be a combination of both.

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