Both the Dow Jones Industrial Average and the S&P 500 set a
new five-month high yesterday, as the U.S. dollar fell sharply on
hopes of further quantitative easing. The optimism was encouraged
by the Japanese central bank's cut of its key interest rate to zero
and its plans to purchase bonds and other asset-backed securities
in order to further stimulate its economy.
All 10 S&P sectors had gains yesterday, led by the
materials, industrials and financial sectors. And the
technology-laden Nasdaq rose 2.4% to its highest level since May
The trigger for yesterday's run-up was a positive September ISM
number. The index came in at 53.2 versus an expected 51.8. The
report is comprised of service-sector companies, but it also
includes construction and public administration, so it is
considered representative of a broad base of the economy.
The other major push for stocks was Australia's decision to
leave interest rates at current levels rather than raising them as
most economists had expected.
Several favorable corporate reports, led by
), may have also contributed to buyers' optimism. The big retail
chain said that sales in September were up 0.4% versus an expected
decline, and the shares gained 2.6%.
Treasurys remained in demand with the 10-year note's yield
falling to 2.48%. The dollar fell against the euro, which closed at
$1.383, up from $1.3689.
At the close, the Dow Jones Industrial Average rose 193 points
to 10,945, the S&P 500 gained 24 points at 1,161, and the
Nasdaq gained 55 points to 2,400.
The NYSE traded 1.2 billion shares, and the Nasdaq traded 624
million shares, both with advancers over decliners by
November delivery crude oil rose $1.56 to $84.84 a barrel, which
is the highest level for crude oil since May 3, and was spurred on
by weakness in the U.S. dollar. The
Energy Select Sector SPDR
) rose $1.32 to close at $57.42.
October gold rose $12.50 to $1,338.90 for the eighth gain in 10
PHLX Gold/Silver Sector Index
) rose 6.1 points to close at 202.88.
What the Markets Are Saying
The bull has spoken. Yesterday, the major indices settled the
issue of the near and intermediate direction with a resounding
break over resistance that has held back buyers for more than five
months. And even though volume, at 1.2 billion shares on the NYSE,
is not yet at classically high levels, it is good enough to confirm
the breakout since breadth came in at over 4-to-1.
This puts the market back on the offensive with the next
resistance coming at the post-flash-crash rebound of May 13. For
the S&P that number is 1,174, for the Dow it is 10,953, and for
the Nasdaq the number is 2,434.
The break yesterday also confirms that the S&P 500′s inverse
last discussed here on Sept. 27
, has met the criteria needed to confirm a genuine break. The
neckline of the formation at 1,129 was penetrated on Sept. 20, but
required a 3% break to confirm it. That number, 1,163, was met
yesterday, and gives a target of around 1,230. This, of course,
would be a new high and, if it makes it, would confirm that the
bull market has resumed. The number 1,230 is curiously coincidental
in that the
of 61.8% retracement of the bear market is also at 1,230, according
to S&P's Mark Arbeter.
Finally, the stochastic and momentum indicators also flashed a
buy signal yesterday. And the 50-day moving average of the Dow
Industrials crossed up and through its 200-day for a gold cross
Now, before our young traders jump into this market with both
feet, I must caution that all internal indicators are still
overbought, so it would not be unusual for stocks to surge for a
day or so and then have a sharp round of profit-taking. If you
trade, use common sense and stop-loss orders. And don't overextend
Buy only on support levels and take profits on
If the bull market has resumed, then there will be plenty of
time to make money - just don't lose it now in a rush of bullish
For one sound way to make money, see the
Trade of the Day
Today's Trading Landscape
Earnings to be reported before the opening
Acuity Brands, Constellation Brands, Costco, Helen of Troy,
Monsanto, Robbins & Myers and RPM.
Earnings to be reported after the close include:
Immucor, Marriott and Ruby Tuesday.
Economic reports due:
Bank Reserve Settlement, MBA purchase applications, Challenger
Job-Cut Report, ADP National Employment Report, EIA petroleum
status report and Treasury STRIPS.
If you have questions or comments for Sam Collins, please
e-mail him at
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