Emerging Buying Opportunity in Stocks?

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A rally in the financial sector on Wednesday helped push the broader market to its second consecutive up day. The S&P 500 extended its gain for May to 1.2%.

The Financial Select Sector SPDR Fund (XLF) advanced 1.1% on Wednesday (see my Trade of the Day). The day’s buying was also spurred by a jump in oil prices to new 2016 highs after a Department of Energy report showed falling stockpiles, as well as an approval of fresh loans for Greece, which prevents its default in July.

Crude oil’s 1.9% advance to $49.56 a barrel had a ripple effect on producers and oil equipment suppliers. Notable winners included Chesapeake Energy Corporation (CHK), up 7.4%, and Transocean LTD (RIG), up 9.7%.

While the odds of a rate increase by the Federal Reserve in June were just 4% earlier this month, they now stand at 32%, according to the CME Group’s FedWatch.

Across the pond, the Stoxx Europe 600 was up 1.3% to its highest close in almost a month. This was due to the temporary resolution of Greece’s debt problem, but it does not solve the long-term economic difficulty.

Hong Kong’s Hang Seng Index rose 2.7%, but stocks in Shanghai ended lower due to the weakest close in the yuan against the U.S. dollar in more than five years.

Gold lost 0.4% at $1,223.50 an ounce, and the yield on the 10-year Treasury note rose to 1.87%, up from 1.86% on Tuesday.

At Wednesday’s close, the Dow Jones Industrial Average rose 145 points to 17,852, the S&P 500 gained 14 points at 2,091, the Nasdaq was up 34 points at 4,895, and the Russell 2000 advanced 6 points to 1,141.

The NYSE Composite’s primary exchange traded 913 million shares with total volume of 3.8 billion. The Nasdaq crossed 1.8 billion shares. On the Big Board, advancers outpaced decliners by 2.1-to-1, and on the Nasdaq, advancers led by 1.8-to-1. Block trades on the NYSE were almost unchanged from Tuesday’s total of 5,391 with just 5,397 reported.

S&P 500 Chart
Click to Enlarge

Chart Key

The S&P 500 has exceeded expectations and now could make a run to the April 20 high at 2,111. It is supported by good group rotation and a fresh MACD buy signal. Volume, however, is still lacking, so making a charge against May’s all-time high at 2,135 could prove difficult.

Conclusion

There have been few stock market advances as powerful as the run from the January/February double-bottom. And the jump from what appeared to be a head-and-shoulders breakdown is impressive as well.

Even if the S&P 500 fails to make a new high, it now has significant support at the 2,040 line. A pullback to that line could be a good buying opportunity as long as the index does not close below the line.

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-emerging-buying-opportunity-in-stocks/.

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