Stocks rallied again Monday as investors concluded the Federal Reserve would delay an interest rate hike due to last week’s disappointing jobs report. The Fed has already said that two factors — inflation and jobs — will guide its future policy. So, in a perverse way, bad news (sagging jobs) turns into good news for stocks.
The Dow Jones Industrial Average rose 1.9%, the Nasdaq gained 1.6%, and the S&P 500 was up 1.8%.
In the past five sessions, the S&P 500 has advanced 5.5% — its longest winning streak this year and the biggest percentage gain since December 2011. But the S&P 500 is still 6.9% off its all-time high, and the Dow is 8.6% from its peak.
All 10 sectors of the S&P 500 gained ground Monday. Even the health care sector rose 0.3% despite another rough day for biotech stocks. The iShares NASDAQ Biotechnology Index (ETF) (IBB) closed down 0.7% after being off as much as 2.2% intraday.
Commodities staged a rally, giving many other stocks a boost. Crude oil for November delivery increased 1.6% to $46.26 a barrel. Gold rose 0.1% to $1,138.10 an ounce.
At Monday’s close, the Dow Jones Industrial Average jumped 304 points to 16,776, the S&P 500 gained 36 points at 1,987, the Nasdaq was up 73 points at 4,781, and the Russell 2000 increased 28 points at 1,142.
The NYSE Composite’s primary exchange traded 1.1 billion shares with total volume of 4.3 billion. The Nasdaq crossed almost 2 billion shares. On the Big Board, advancers outpaced decliners by 7-to-1, and on the Nasdaq, advancers led by 3-to-1.
The curious formation on the S&P 500, as seen on the SPDR S&P 500 ETF Trust (SPY), can be interpreted as either bullish or questionable.
A sell signal from my proprietary indicator, the Collins-Bollinger Reversal (CBR), occurred exactly at the bottom of a gap down at $202.89. This is now the number we must watch.
A penetration of it would confirm a double-bottom and “W” reversal. But an influx of institutional money from 401(k) and other retirement sources may have forced money managers to buy since Thursday, which was also the first day of the fiscal year for the government.
Conclusion
I was rightly chided by one of our readers for not reporting what he termed “Friday’s inside reversal.” Friday’s reversal was actually an “outside reversal” in that both the high and low of Thursday were exceeded. But he is correct that it could be a significant bullish event and I should have mentioned it.
However, Friday’s reversal only has short-term meaning unless SPY closes above the line at $202.89 to $202.92. If that happens, it could indicate the correction is over and a challenge to the massive overhead has begun.
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.
