Dow Reverses Course and Recoups Most of Its Losses

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"You have to like the resiliency of Mr. Market here," said Schaeffer's Senior Technical Strategist Ryan Detrick, CMT, following a bounce-back that saw the Dow nearly get back all the losses suffered the day before. "After the worst day of the calendar year, it bounces back with more big gains just as quickly. Everyone knows the market is overbought, yet it isn't giving participants much of a chance to enter."

Continue reading for more on today's market, including :

  • Why our Senior Technical Strategist Ryan Detrick says the current stock rally is NOT being funded "because money left bonds" and why he's "calling BS."
  • A chart by our Senior Options Strategist Tony Venosa, CMT, that shows why Bank of America ( BAC ) is a good candidate for a long-term bullish trade.
  • Why a bearish stance on pharmaceutical maker Merck & Co. ( MRK ) could be a good contrarian play .
plus...
  • The market regains lost ground, the budget fix proposed by the White House, and how another video game release is helping Electronic Arts ( EA ).

With the White House offering a short-term budget fix and some good news emerging on housing prices, the bulls were back after a one-day absence as the Dow Jones Industrial Average (DJI) recouped most of the losses taken the previous day. The Dow finished at 13,979.30, gaining 99 points, or 0.7%, and traded north of 14,000 for much of the afternoon before settling back near the bell. In a near reversal from Monday, all but two companies advanced on the 30-member Dow, led by UnitedHealth Group ( UNH ), which jumped 3.6%. International Business Machines ( IBM ) was the largest decliner, falling nearly 0.5%.

The S&P 500 Index (SPX) also rose, gaining almost 16 points, or 1%, to close at 1,511.29. The index regained its foothold above 1,500 -- the sixth time in the last eight sessions it has closed there -- and touched a new five-year peak of 1,514.96 in intraday action. The Nasdaq Composite (COMP) gained 40 points, or 1.3%, to finish at 3,171.59.

CLOSING SUMMARY - INDICES

CLOSING SUMMARY - NYSE AND NASDAQ

A Trader's Take :

"Europe was the reason for the drop yesterday, now they are getting credit for the bounce today," Detrick said. "All I know is we've had a great run and lots of traders are getting itchy trigger fingers to pick a top."

3 Things to Know About Today's Market :

  • President Obama proposed a short-term budget aimed at lowering the deficit and spending while restructuring taxes, in an effort to stave off the automatic tax increases and spending cuts -- known as the "sequester" -- scheduled for March 1. (The Washington Post)

  • Computer maker Dell Inc. (DELL) officially agreed to a proposed $24 billion deal to take the company private --and chairman and CEO Michael Dell will remain at the helm after kicking in his stake of 14%. (The New York Times)

  • Home prices are on the rise , with levels up 8.3% in December as compared with the same month in the previous year. (MarketWatch.com)

5 Stocks We Were Watching Today :

  1. The launch of the latest edition of the Dead Space video game saga helped Electronic Arts ( EA ) draw in bullish traders .
  2. The possible merger featuring British telecom/entertainment firm Virgin Media (VMED) also attracted a lot of bullish traders .
  3. A recent technical bounce by Hewlett-Packard (HPQ) didn't deter pessimistic traders.
  4. The Walt Disney Company's (DIS) impending earnings release led to a lot of optimistic trades .
  5. Department store chain J.C. Penney Company's (JCP) legal issues led to a bet on volatility .

EARNINGS

For a look at today's options movers and commodities activity, head to page 2.

STOCKS - NOTABLE CALL ACTIVITY

STOCKS - NOTABLE PUT ACTIVITY

Commodities :

Crude futures closed higher, bolstered by stronger-than-forecast data on the U.S. services sector. Oil for March delivery added 47 cents, or 0.5%, to end at $96.64 per barrel. Meanwhile, gold futures fell, with positive economic news from the U.S. and Europe diminishing the metal's safe-haven appeal. Gold for April delivery gave up $2.90, or 0.2%, to close at $1,673.50 per ounce.

SCHAEFFER'S MARKET POSTURE

At the end of every market day, the staff at Schaeffer's Investment Research reviews the trading day in detail, covering major events and key market developments. Don't miss this critical, timely and insightful report. If you enjoyed today's edition of Market Recap, sign up here for free daily delivery straight to your inbox.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Options

Referenced Stocks: BAC , EA , IBM , MRK , UNH

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