Apparently, Wall Street is growing more confident about a
fiscal-cliff deal and what the Fed might have to say about
additional stimulus when its two-day meeting concludes today.
The most encouraging part of Tuesday's rally was the Nasdaq
Composite's gap up at the open and close above its 50-day simple
moving average (
). It was an unequivocal day of accumulation for the tech index.
Volume rose nicely from Monday's level to just over 1.8 billion
The term "melt-up" has been used to describe the market's
recent rally. It's appropriate because it still doesn't strike me
as a market that's under meaningful accumulation. All of the
Nasdaq's gains since November 16 have come in average or
It would have been nice to see a plentiful supply of technical
breakouts Tuesday, but that really wasn't the case. The more you
see of them in the early stages of a rally, the better.
) was happy to oblige, however, as shares jumped 4.2 percent to
$165 in heavy volume. Volume spiked to nearly 4.4 million shares,
well above its average daily volume of 1.8 million shares. Volume
expansion like this was a sign of at least some buying by mutual
funds and other institutional investors. They are the true
drivers of a stock's price. Without institutional buying, a stock
will have a hard time making meaningful headway.
Rackspace Hosting (NYSE:
) is also making a case it wants to be a leader as it sets up in
a bullish base. It cleared a swing point of $67.18 on November 28
but didn't make much progress. It's been drifting lower in light
volume in recent days, bringing the possibility of a new breakout
over $70 into play. Rackspace normally trades about 1.5 million
shares a day. A bona fide heavy-volume breakout for Rackspace
would see the stock trade that amount during the first few hours
Meanwhile, the underperformance of the home builders wasn't
hard to notice Tuesday. They sat out the rally as the group
continues to face selling pressure. The iShares Dow Jones U.S.
Home Construction Index Fund (NYSE:
) remains under distribution, below its 50-day SMA. Big buyers
may come into the group again but for now, sellers remain in
control. For now, it's better to look elsewhere for
Finally, earnings season is pretty much over, but after the
close today, watch for earnings from small-cap Restoration
). The upscale home-furnishings retailer is expected to earn
$0.04 a share, reversing a year-ago loss of $0.13. Sales are seen
rising 21 percent to $282.4 million. It's a high-multiple stock,
currently selling at 38 times trailing earnings and 35 times
forward earnings, but earnings growth prospects look pretty good
for fiscal 2013 and 2014 so its valuation isn't entirely
unreasonable. Fiscal 2013 earnings are seeing rising 82 percent
to $1.02 a share and 27 percent in 2014 to $1.30 a share.
Its relative price strength is worth noting ahead of the
results. The company recently came out of a re-organization and
started trading again in early November. If earnings impress, a
heavy-volume breakout over its recent high of $38.33 could be in
the cards. Shares closed Tuesday at $36.06, down 1.2 percent in
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