The Bulls are Sick of Hearing This, But…

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Stocks rallied Tuesday with technology and financials leading the charge. The Dow Jones Industrial Average rose 1.2%, the S&P 500 advanced 1.5% and the Nasdaq jumped 2%.

The buying was spurred by strong housing data and rising oil prices. New home sales increased 16.6% in April — the best month in more than eight years. And an intraday reversal in crude oil led to a 1.1% gain to $48.62 a barrel.

The Wall Street Journal reported that “investor confidence that higher interest rates won’t undermine stock prices” also contributed to Tuesday’s market gains.

On Monday evening, Philadelphia Federal Reserve President Patrick Harker said we could “easily” see two or three interest rate hikes this year, possibly as soon as June. But rather than sparking a sell-off in stocks, traders seemed to interpret this to mean the economy is in good shape.

Analysts noted that financials and technology stocks should be some of the biggest beneficiaries of rising rates and an improving economy. Dow components Microsoft Corporation (MSFT), Intel Corporation (INTC) and Cisco Systems, Inc. (CSCO) all made solid gains.

In earnings news, Toll Brothers Inc (TOL) soared 8.7% after delivering strong quarterly results. Best Buy Co Inc (BBY) fell 7.4% after the electronics retailer issued a disappointing forecast.

Gold lost 1.8% at $1,228.90 an ounce. And the yield on the benchmark 10-year Treasury note rose to 1.86%, up from 1.84% on Monday, as bonds fell.

At Tuesday’s close, the Dow Jones Industrial Average rose 213 points to 17,706, the S&P 500 gained 28 points at 2,076, the Nasdaq was up 95 points at 4,861, and the Russell 2000 added 24 points at 1,135.

The NYSE Composite’s primary exchange traded 889 million shares with total volume of 3.6 billion. The Nasdaq crossed 1.9 billion shares. On the Big Board, advancers outpaced decliners by 3.3-to-1, and on the Nasdaq, advancers led by 3.7-to-1. Block trades on the NYSE increased to 5,391 from 5,061 on Monday.

SPY Chart
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Chart Key

SPDR S&P 500 ETF Trust (SPY) broke from its near-term channel and is close to challenging its April high at $211. That high connects to the November high at $212 and is just below the all-time high near $214 made in May 2015.

A golden cross supports the break, as does MACD, which is close to a buy signal. However, volume is still not at the level expected of a major breakout.

Dow Jones Industrial Average Chart
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The Dow Jones Industrial Average had a good day with a triple-digit gain. However, it too lacked volume. And the index has failed to break the near-term resistance line at about 17,800. Its 50-day moving average at 17,708 is another barrier that must be overcome.

Conclusion

Stocks put in a strong showing Tuesday with good group rotation. The S&P 500 penetrated its 50-day moving average, while the Nasdaq and Russell 2000 closed above both their 50-day and 200-day moving averages. MACD issued a buy on the Russell 2000 but, again, volume is lacking.

I know I sound like a broken record when it comes to the volume issue, but many of the world’s greatest traders emphasize the importance of volume accompanying a breakout.

This time may be different, but I’ve heard that before too.

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/2016/05/daily-market-outlook-bulls-sick-hearing/.

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