After logging its second weekly decline of the year, yesterday the market exploded higher after the opening bell sounded. Federal Reserve Chairman Ben Bernanke’s comments before the opening were a catalyst for buyers who have been “on the fence.” He emphasized the need to keep interest rates low in order to maintain growth in the labor market. This led some investors to conclude that the FOMC may be discussing further quantitative easing, i.e., QE3.
At the close, the Dow Jones Industrial Average was up 161 points to 13,242, the S&P 500 gained 19 points at 1,417, and the Nasdaq rose 55 points to 3,123. Both the S&P 500 and Nasdaq scored new highs. The NYSE traded 754 million shares, and the Nasdaq crossed 415 million. On both exchanges, advancers outnumbered decliners by over 3-to-1.
Just as it looked like the major indices were losing momentum, the S&P 500 blasted to a new high on a stochastic buy signal. The power of this bull market is truly amazing as, day after day, higher prices push the trendlines of our chart to even steeper angles.
The S&P 500 not only took out the recent high at 1,414, but turned from a low last week at 1,387 and a pattern that looked like the beginning of a consolidation.
The Nasdaq led the major indices by advancing 1.78% yesterday. The index opened with a powerful new breakaway gap that shows a shift in buying to the smaller, less quality-oriented stocks. By the close, the index had picked up another buy signal from the stochastic and looks bound for much higher prices.
Conclusion: The Fed may be at the bottom of the move higher again as talk of a pseudo QE3 surfaced. But regardless of the reason, “the trend is your friend,” and that trend is decidedly up.
The major indices that did not break to new highs were the Dow and the NYSE Composite. But the NYSE Composite did gap higher accompanied by a new stochastic buy, and the quality-oriented Dow rose 1.23% and is less than 100 points from a new high.
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.
