On Wednesday, mid- and small-cap stocks led the market with high percentage gains, but the Dow industrials and S&P 500 rose to record highs.
The gains resulted from expectations that today’s confirmation hearing for Janet Yellen to be the next Federal Reserve chief would support the continuation of an easy-money policy. At 4:30 p.m., the Fed released a copy of Ms. Yellen’s testimony, which supported that view.
At the close, the Dow Jones Industrial Average gained 71 points at 15,822, the S&P 500 gained 14 points to 1,782, and the Nasdaq rose 46 points to 3,966. The NYSE traded 3.3 billion shares and the Nasdaq crossed 1.8 billion shares. (Note: Starting today, we will publish the NYSE and Nasdaq total volume from the Market Data Center of The Wall Street Journal.) Advancers outpaced decliners on the Big Board by 2.2-to-1, and on the Nasdaq, advancers were ahead by 2.3-to-1.
The blue-chip Dow Jones Industrial Average broke to a new intraday high and closing high, as did its companion index, the Dow Jones Transportation Average (not shown).
The break to an all-time high on the same day by both major Dow indices is convincing evidence of a new Dow Theory buy signal. The important signal was accompanied by a “key reversal day” up — a rare occurrence — and a bullish MACD.
The S&P 500 also broke to a new closing and intraday high as it blasted through the daily tops of the past two weeks. It too is supported by a bullish MACD. Its first support is the former resistance at 1,775.
Conclusion: The Russell 2000 (small-cap) and Nasdaq (mid-cap) indices had big percentage moves higher Wednesday, with the Nasdaq missing a new high by just a fraction. That, coupled with the breakout of the senior indices, is powerful support for a more bullish stance.
I’d still prefer to see more volume and breadth at around 5-to-1 as additional bullish support, but Wednesday was a very strong day for equities. Investors who are still on the sidelines may miss the biggest move up of the entire bull market. It is time for the public to get involved in a stock market that could easily achieve another 1,000 Dow points by the end of Q1 2014.
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.