The Bull is Alive and Well
A combination of strong earnings from a big-cap technology stock and a pair of positive economic reports resulted in a broad-based rally yesterday that took all 30 of the Dow's components higher. (Check out Sam Collins' Trade of the Day here)
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Cisco's (CSCO) better-than-expected earnings reported after the close Wednesday was the catalyst for a strong opening in the technology sector that swept almost all large-cap techs along with it. In addition to reporting earnings that beat estimates, Cisco said that its outlook is solid and it authorized an additional $10 billion for its share repurchase plan. The large-cap tech explosion gave the Nasdaq (NASD) its best day since July.
Data from the International Council of Shopping Centers and Goldman Sachs showed that retailers had a gain in sales for the secondstraight month in October. And early yesterday investors were treated to news showing a weekly decline in jobless claims with non-farm productivity surging 9.5%. It marked the largest gain in productivity since 2003 and set the stage for a positive jobs report today.
At the close, the Dow Jones Industrial Average (DJI) was up 204 points to 10,006, the S&P 500 (SPX) gained 20 points to 1,067, and Nasdaq rose 50 points to 2,105.
Volume on the NYSE totaled 1.3 billion shares with advancers ahead of decliners by 5-to-1.
Nasdaq traded 734 million shares and advancers there were ahead by 4-to-1.
December crude oil fell 78 cents to $79.62, and the Energy Select Sector SPDR (XLE) rose 96 cents to $57.23.
Gold for December delivery rose $2 to $1,089.30 an ounce in choppy trading, and the PHLX Gold/Silver Index (XAU) closed at $170.71 for a gain of $1.04.
What the Markets Are Saying
Thursday's dramatic acceleration, coupled with a "key reversal day" on both the S&P 500 and the Nasdaq on Monday, leads me to say the following:
Chartwise what we have on Nasdaq is a new two-point support line with the July 8 low connecting with Monday's key reversal day intraday low of 2,024. (See the S&P and Nasdaq's chart here.)
Nasdaq's internal indicators have suddenly reversed, issuing a buy signal from its slow stochastic, while its Relative Strength Index (RSI) is now rising after hitting 37.56 last week -- the lowest reading for RSI since the bottom in March.
In brief then, the charts are bullish for both indices. And the sentiment readings are bullish, as well, with the American Association of Individual Investors (AAII) sentiment survey this week at 22.22% bullish and 55.56% bearish. This is the most bearish reading since Feb. 19, just before the March bottom, and insider selling has fallen sharply in the last week, according to Investors Intelligence.
Conclusion: The bull is alive and well and, barring a sharp closing low under the intermediate support lines of the key indices, could reach the intermediate target of S&P 1,120 and, perhaps, even Nasdaq's goal of 2,300 before year-end.
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Sam Collins is a retired registered, fee-based portfolio manager who may be contacted at samailc@cox.net. You can also check out an archive of some of his most recent market outlooks by clicking here.
Get more on Today’s Trading Landscape here.This article was written by Sam Collins, OptionsZone.com's chief technical analyst.
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