Stocks soared Wednesday following the release of minutes from the Federal Reserve’s September meeting, which showed concern for weak growth abroad. The Fed expressed enough focus on the problem to “err on the side of giving more accommodation,” according to Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management.
Treasury prices turned higher, yields lower, and the U.S. dollar fell in relation to the yen, euro and British pound. Gold rallied, but oil continued to slide, falling 1.2% to $87.73 a barrel.
Costco Wholesale (COST) rose 2.8% after beating earnings and revenue estimates. Yum Brands (YUM) gained 1.5% despite reporting disappointing results on weak sales in China.
Chipmakers jumped with Intel (INTC) up 2.4%. Bitechs were also the subject of heavy buying, and the iShares Nasdaq Biotechnology (IBB) rose 2.8%.
At Wednesday’s close, the Dow Jones Industrial Average rose 275 points to 16,994, the S&P 500 gained 34 points at 1,969, the Nasdaq jumped 83 points to 4,469, and the Russell 2000 jumped 21 points to 1,097.
The NYSE traded total volume of 4.4 billion shares, and the Nasdaq crossed 2.5 billion. Advancers outpaced decliners by 4-to-1 on the NYSE and by 2.5-to-1 on the Nasdaq.
The Russell 2000 has led all other indices as it plunged from its double top of May and June. But on Wednesday, the small-cap index executed a key reversal day and issued a buy signal from my proprietary indicator, the Collins-Bollinger Reversal (CBR).
These reversals are viewed as positive indicators especially since they came at a critical support line. However, it will take more than a one-day rally to reverse the death cross from mid-September and the break of the August low that defined a change in its near and intermediate trend. A close above the 1,120 break would help to change the momentum that has built up since the death cross.
Even though severe technical damage has been done to the S&P 500, the support at 1,910 appears to have held. And for this key index, 1,910 appears to be a major “line in the sand.” A close under it would immediately challenge the 200-day moving average and the overall trend.
The index almost executed a complete reversal of the near-term downtrend that began in mid-September when it broke its 50-day moving average. Wednesday’s twin reversals went a long way to putting a halt to the immediate downtrend. A close above the 50-day moving average at 1,974 would complete an upside reversal.
Conclusion
Even with Wednesday’s very bullish reversals, a change in the broad market’s near and intermediate downtrends has yet to be realized. The S&P 500’s MACD is turning up, but the leader of the downtrend, the Russell 2000, has a lot of repair work to accomplish before I’m convinced that the broad-based selling is over. With relatively low volume and average breadth, Wednesday’s reversals appeared to be more short-covering than genuine bottom-building.
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.
