Contagion is still on the minds of investors, but yesterday it worked in favor of stock prices. Spain was able to successfully raise 3.2 billion euros through the sale of bills, and so concerns eased and investors focused instead on strong earnings from several high-profile U.S. companies.
The Dow Jones Industrial Average closed at 13,116, up 194 points, the S&P 500 rose 21 points to 1,391, and the Nasdaq gained 54 points to close at 3,043. Volume on the NYSE totaled 709 million shares, and 418 million shares traded on the Nasdaq.
After the close, Yahoo (NASDAQ:YHOO), IBM (NYSE:IBM) and Intel (NASDAQ:INTC) reported earnings that beat analysts’ estimates. But revenues appear to be generally lower, especially at Intel. Yahoo and IBM were up and Intel was down in after-hours trading.
For five days, the S&P 500 traded below its 50-day moving average at 1,378 and even fell under the resistance zone at 1,371–1,390. But yesterday it turned and rose 1.55%, regaining the ground above the 50-day moving average and even slightly above the resistance zone.
By popping above these barriers and Thursday’s high at 1,388, the S&P 500 has neutralized the near-term downtrend. To add icing to the cake, the stochastic flashed a new buy signal. Its next barrier is the 20-day moving average at 1,395.
Since early this year, the Nasdaq has led all other indices with a spectacular run of over 20%. Thus its recent decline from the March high and Monday’s slice through its 50-day moving average looked like a possible prelude to a more serious breakdown.
But yesterday’s 1.82% rally, which closed exactly at the top of the support range at 3,042, changes the technical picture to near-term neutral from near-term down. And like the S&P 500, coupled with a buy signal from the stochastic, the outlook is now much brighter.
Conclusion: The near-term trend has been neutralized from “down,” but near-term trends are volatile and another reversal down is not out of the question. If we see a follow-through (up) today, both major indices (S&P 500 and Nasdaq) will have completed a reversal. A close above the overhanging 20-day moving averages (green line) at S&P 1,395 and Nasdaq 3,068 should lead to an attack on the April highs.
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.