Oil prices turned higher Wednesday, and with them, the major indices. However, the session began with a 2.3% sell-off in financials and 1.8% drop in industrials.
The rebound from the lows of the day was broad-based, with all of the S&P’s sectors except financials showing a gain.
However, even though the early losses were overcome, volume was low. Some floor traders said this exaggerated the move as high volatility resulted from just a few buyers and almost no sellers. Others said the rally was fueled by higher energy prices and short covering.
Chesapeake Energy Corporation (CHK) jumped 22.2% (48 cents) despite reporting a 53% drop in Q4 revenues, as this was still not as bad as expected.
After being down earlier in the day, WTI oil closed up 0.9% at $32.15 a barrel following an inventory report that showed supplies of refined products such as gasoline fell last week. This helped drive major oil stocks like Chevron Corporation (CVX) and Exxon Mobil Corporation (XOM) higher, each up 0.4%.
But the U.S. economy’s outlook is still questionable with the likelihood of flat interest rates and low oil prices for the remainder of the year, according to a J.P. Morgan Chase report. Therefore, banks are not likely to benefit from the spreads that were expected as a result of higher interest rates.
Gold rose 1.3% to $1,238.70 an ounce. And the yield on the 10-year Treasury note was up slightly to 1.75% from 1.74% on Tuesday.
At Wednesday’s close, the Dow Jones Industrial Average gained 53 points at 16,485, the S&P 500 rose 9 points to 1,930, the Nasdaq was up 39 points at 4,543 and the Russell 2000 was flat at 1,022.
The NYSE Composite’s primary exchange traded 1 billion shares with total volume of 4.3 billion. The Nasdaq crossed 2 billion shares. On the Big Board, advancers outpaced decliners by 1.8-to-1, and on the Nasdaq, advancers led by 1.7-to-1. Block trades on the NYSE increased to 6,147 from 5,103 on Tuesday.
Wednesday’s three-hour pop may have looked impressive, but it lacked volume. It achieved little since the S&P 500 is still shy of penetrating the triple-top and 50-day moving average at 1,947. Support, however, was confirmed at 1,885.
The NYSE Composite, which is composed of all stocks listed on the New York Stock Exchange, looks even worse than the S&P 500.
It has failed to successfully attack the triple-top at about 9,650, the 50-day moving average, also at 9,650, and the resistance line at 9,630. MACD is now very overbought and Wednesday’s 12-point advance was pitiful.
Conclusion
Several commentators on CNBC called Wednesday’s action a “reversal.” But no new high, no trendline breaks and not even an eclipse of Tuesday’s intraday highs means NO reversal!
The excellent technician, Andrew Adams of Raymond James, did point out some bullish indicators: The recent decline appears to have held the long-term trendline that connects the 1990 low to the October 2011 low; a long-term advance/decline line shows breadth is improving; an intermediate downtrend line on crude oil has been violated; and several other long-term indicators hint at an improvement in long-term relative strength.
But these changes (if you can call them that) are so long term they are difficult to apply to this year’s market.
I believe we are still in a secular bull market, meaning a very long-term uptrend, driven by sentiment but with wild fluctuations in various sectors of the market. Sound familiar? Like maybe Wednesday.
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.
