Greatest Bullish Indicator of All Remains Intact

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Strength in technology stocks on Wednesday led the Nasdaq up 1.5% to a new closing high. This was driven in part by a Wall Street Journal report that Broadcom Corporation (NASDAQ:BRCM) was in talks to be acquired by Avago Technologies Ltd (NASDAQ:AVGO). The technology sector of the S&P 500 rose 1.9%, BRCM jumped 21.8%, and AVGO was up 7.8%.

The news of a major acquisition in the technology sector helped boost the overall market as well, and even the big-cap Dow industrials were up 0.7%.

The health care sector rose 1.2%, with biotech up 1.9%. Financials also put in a strong showing, up 1.1%

The retail sector was held back by a 24.4% plunge in Michael Kors Holdings Ltd (NYSE:KORS) after the company delivered a disappointing earnings report. Fossil Group Inc (NASDAQ:FOSL), which makes watches for Michael Kors, sank 6.5%. Coach Inc (NYSE:COH) fell 3.3% after an analyst initiated an “underweight” rating.

The energy sector lagged throughout the day and closed 0.2% lower, pulled down by crude oil, which fell 0.9% to $57.51 a barrel.

The stock market appeared to ignore the continuing problems in Europe and Greece. The U.S. economy, which is slowly improving, is still likely to force the Federal Reserve to raise interest rates before year end.

At Wednesday’s close, the Dow Jones Industrial Average rose 121 points to 18,163, the S&P 500 gained 19 points at 2,123, the Nasdaq was up 74 points at 5,107, and the Russell 2000 gained 16 points to 1,254.

The NYSE traded a total of 3.1 billion shares, and Nasdaq crossed 1.8 billion shares. On the Big Board, advancers outpaced decliners by 2.6-to-1, and on the Nasdaq, advancers were ahead by 2.2-to-1.

VIX Chart
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The VOLATILITY S&P 500, also known as the VIX or “fear index,” popped on Tuesday on a gap, but settled back down on Wednesday, confirming that the bulls are still in charge of the stock market.

Most technicians are of the opinion that as long as the VIX doesn’t jump above the twin 17s of March, stocks will not break to the 200-day moving averages of the major indices.

Nasdaq Chart
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Chart Key

Stocks were led higher by the mid-cap sectors Wednesday, as represented by the Nasdaq. The index finally exceeded its closing high, reaffirming its bull channel advance but still not strong enough to establish a clear new intraday high.

MACD is in the bull zone but failed to confirm a new close by the sag to the zero line.

Conclusion

While on Tuesday, the TV mavens were all doom and gloom, Wednesday their bullish euphoria knew no bounds.

Years ago, a wise trader said, “Stocks will do whatever it takes to confound the most investors most of the time.” As stocks move ahead in the face of global worries and a sluggish economic recovery, coupled with a pending interest rate hike, that saying is especially appropriate.

But as we focus on the technical characteristics of today’s stock market, there is one factor that is clearly long-term bullish: The market is still ignoring bad news. And there is no greater bullish indicator than that.

Until the major bull market trends are violated and good news is treated badly, we remain in the long-term bull camp. Now, that does not mean that we should always buy stocks. Near and intermediate trends will fluctuate like waves and ripples, even in a strong incoming tide.

Thus, to be a successful trader, you must overcome the fear of buying on the worst of days and selling on the best. That is why I graphically provide readers with clear trendlines and moving averages to help them trade the channels despite the TV hype and disinformation.

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.


Article printed from InvestorPlace Media, https://investorplace.com/2015/05/daily-market-outlook-greatest-bullish-indicator-remains-intact/.

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