Technicals on the Bulls’ Side


Stocks rebounded yesterday after days of selling on positive news regarding Ireland's debt problems, better unemployment numbers, and a successful General Motors Corporation (NYSE: GM ) offering.

GM returned to trading on the NYSE following its post-restructuring IPO. The stock was offered at $33, and opened for trading at $35 before pulling back and closing at $34.19. Ford Motor Co. (NYSE: F ) fell 3.36% to $16.12.

Initial unemployment claims for the week ending Nov. 13 came in lower than expected. But the Philly Fed Index for November improved with a reading of 22.5 (from 1 in October). Economists had predicted a reading of just 5. And leading economic indicators for October rose 0.5%, which was slightly less than expected.

The yield on the 10-year Treasury note went up to 2.9%. The euro rose against the U.S. dollar following better news from Ireland. The euro was quoted late Thursday at $1.3628 versus $1.3515 on Wednesday.

At the close, the Dow Jones Industrial Average gained 173 points at 11,181, the S&P 500 gained 18 points at 1,197, and the Nasdaq rose 38 points to 2,514. The NYSE traded 1.2 billion shares with advancers over decliners by more than 4-to-1. On the Nasdaq, advancers led by 3-to-1 on volume of 560 million shares.

Crude oil for December delivery rose $1.41 to $81.85 a barrel. The Energy Select Sector SPDR (NYSE: XLE ) closed at $63.06, up $1.36. December gold gained $16.10 to settle at $1,353 an ounce, and the PHLX Gold/Silver Sector Index (NASDAQ: XAU ) rose 3.6 points to close at 210.79.

What the Markets Are Saying

After three days of hectic selling, buyers finally turned the market and bounced the major indices from just above the dangerous 50-day moving average for each. The rebound resulted in a run back to around the breakdown points of Tuesday, which for each index is roughly at their respective20-day moving average.

But all failed to break above resistance at the 20-day moving average, while the S&P 500 closed smack on the line, leaving it with a narrow trading range bounded by the 20-day and 50-day moving averages. The bulls would like to have seen a close above resistance, but turning as it did from a major support mark, the bulls have managed to at least turn the tide from down to neutral and can live to fight another day. So the case for the bulls has become technically stronger, especially in the longer term because of yesterday's "test" of a major support zone.

And here is another point for the bulls: In just five days, our internal indicators (MACD, stochastics, momentum and RSI) have all fallen from overbought to neutral. However, the sentiment numbers still favor the bears, but since sentiment reports lag the market action by about a week, if there is an improvement we won't see it until late next week.

But even with yesterday's rally, there is a solid strike against a major upside breakout and it is this: The stock market is very susceptible to news, and that equates to a lack of conviction on the part of both buyers and sellers. This leaves the daily moves in the hands of traders who bounce the indices from support to resistance in days, resulting in extended periods of range-bound trading. If the pattern continues, a solid move in either direction could be postponed until next year.

For one stock to buy now, see the Trade of the Day .

Today's Trading Landscape

To see a list of the companies reporting earnings today, click here .

For a list of this week's economic reports due out, click here .

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

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.

This article appears in: Investing , Stocks

Referenced Stocks: F

Sam Collins

Sam Collins

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