On Monday, stocks rebounded from one of the worst weeks of selling in two years. The buying followed a positive retail sales report, but short-covering probably played a role as well.
March retail sales rose 1.1%, the biggest monthly gain since September 2012, above economists’ expectations of 0.8%. Business inventories increased for the second straight month in February.
Energy stocks led the list of winners, with Chevron (CVX) and Exxon Mobil (XOM), up 1.4% and 1.2%, respectively.
At the close, the Dow Jones Industrial Average rose 146 points to 16,173, the S&P 500 gained 15 points at 1,831, and the Nasdaq jumped 23 points to 4,023. The NYSE traded a total of 3.1 billion shares, and the Nasdaq crossed 1.9 billion. Advancers led decliners by a ratio of 1.9-to-1 on the Big Board, but on the Nasdaq, there were just slightly more advancers than decliners.
In a volatile session, the S&P 500’s decline held at 1,815. This forms a volatile trading band at 1,813 to 1,850, with resistance at its 50-day moving average at 1,845. MACD is in negative territory, and the Fibonacci target of a 61.8% retracement of the February to April rally remains at 1,799.
This daily trading chart best illustrates the extreme volatility of the Russell 2000. The index opened the day with a gap up at 1,120 from Friday’s close at 1,111. It then retraced part of the gap up and rallied to its high at 1,126. It traded lower until mid-afternoon, when it fell to its low of the day at 1,105.56. But within 45 minutes, it retraced much of the afternoon decline and closed at 1,115.35.
Conclusion: Bottom-making is usually a volatile process. Traders love this sort of action, but being on the wrong side of the market can be uncomfortable.
The S&P 500 has held at the 1,813 support line for two sessions — a positive for the bulls. A strong rally and a close above 1,850 would turn the index to neutral from intermediate trend down. But a close below 1,813 would confirm that, at a minimum, the Fibonacci target of 1,799 is attainable and the trend is down.
Only experienced traders with stout hearts should venture into trading these unpredictable swings. But some stocks in the biotech and high-tech sectors that have taken a beating have reached deeply oversold prices and could be bought in stages, so as to average out at a reasonably low price. There is some low-hanging fruit to be picked — like the Trade of the Day.
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.