Bulls Hold Off Big Bad Bear, but for How Long?

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Despite another sell-off in China, U.S. stocks rallied on Wednesday as small-cap and technology stocks pushed the Nasdaq to a gain of 2.5%. The Dow Jones Industrial Average and S&P 500 added 1.8%.

All 10 sectors of the S&P 500 participated in the gain, but utilities rose just 0.1%. Biotech was a standout sector after declining about 10% in the past month. The iShares NASDAQ Biotechnology Index (ETF) (IBB) rose 3.9%.

Tech also outperformed, up 2.4%, with big gains in Microsoft Corporation (MSFT), Apple Inc. (AAPL), Facebook Inc (FB) and Google Inc (GOOGL).

The ADP National Employment Report showed nonfarm private business sector employment rose to 190,000 in August, which was below expectations of 201,000.

Crude oil prices rose 2.1%, closing at $46.33 a barrel. Gold fell 0.5% to $1,133.60 an ounce. And the benchmark 10-year Treasury note’s yield rose to 2.19% from 2.17% on Tuesday.

At Wednesday’s close, the Dow Jones Industrial Average gained 293 points at 16,351, the S&P 500 rose 35 points to 1,949, the Nasdaq was up 114 points at 4,750, and the Russell 2000 added 18 points at 1,146.

The NYSE Composite’s primary market traded over 1 billion shares with total volume of 3.7 billion shares. The Nasdaq crossed 1.9 billion shares. On the Big Board, advancers outpaced decliners by 2.8-to-1, and on the Nasdaq, advancers led by 2.2-to-1.

NYSE Composite Chart
Click to Enlarge

Chart Key

We haven’t viewed one of my favorite charts since the August breakdown. The NYSE Composite contains all stocks traded on the “Big Board” and is thus a meaningful cross-section of most equity markets.

The index broke from a triple-bottom at about 10,650 and gapped three times before hitting a closing low at 9,509.59. The breakdown amounted to a 10% decline from the triple-bottom and a 15.5% decline from the May high at 11,254.87. This is clearly a “correction,” which most technicians consider a pullback of 10% or more.

Conclusion

No matter what chart we examine, it is clear the stock market has taken a beating. A correction of more than 10% has been accompanied by bearish breadth and high downside volume — at 23-to-1 on the NYSE and 9-to-1 on the Nasdaq on Tuesday.

Wednesday’s rally of 293 Dow points and 114 points on the Nasdaq was a relief after Tuesday’s drubbing, but that may be all it was — a temporary relief.

Certainly the near- and intermediate-term trends are down. All that is required to trigger a long-term downtrend (bear market) is a new closing low in the Dow industrials under 15,666, and a new closing low in the Dow transports under 7,467, both made on Aug. 25.

Thus far, there is no firm confirmation of a big bad bear. Tomorrow I’ll focus on what it would take to turn the market back up. The short answer: A lot!

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/2015/09/daily-market-outlook-rally-holds-off-big-bad-bear-but-for-how-long/.

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