In a week when the stock market treated good news badly and bad news finally rallied the market, traders and investors alike will no doubt be more than happy to call it quits for three days and clear their heads.
Yesterday, stocks reversed course after four miserable days and followed the lead of China, which rallied for a huge gain of more than 5% the night before.
The fact that jobless claims for the week ending Aug. 29 totaled 570,000 (4,000 more than analysts had anticipated) was almost totally ignored, as was the report of continuing claims, which jumped to 6.23 million from 6.14 million.
But stocks did start off weak after the ISM service index topped expectations of 48 by coming in at 48.4, which is a high for the year. Shortly after the ISM numbers, the financial group picked up bargain hunters, and it wasn’t long before other groups began to move too.
Even though retailers like Gap (GPS), Limited (LTD) and Target (TGT) reported negative same-store sales, they weren’t as bad as feared, so they rallied, as well.
At the close, the Dow Jones Industrial Average (DJI) was up 64 points to 9,345, the S&P 500 (SPX) gained 8 points to 1,003, and the Nasdaq (NASD) rose 16 points to 1,983.
Volume was relatively low, with the NYSE trading just 1.1 billion shares and Nasdaq crossing 571 million. But on the Big Board, advancers beat decliners by almost 4-to-1, and on the Nasdaq, the ratio was in favor of the advancers by 2-to-1.
>
October crude oil fell 9 cents to $67.96, and the Energy Select Sector SPDR (XLE) rose 35 cents to $50.26.
Gold for December delivery experienced a strong rally as it approaches $1,000 an ounce. Yesterday the metal closed at $992.50 an ounce, up $14, and the PHLX Gold/Silver Index (XAU) shot up $7.32 to $164.19, with a new intraday high for the year at $165.88.
What the Markets Are Saying
Whenever all of the guests on the financial news shows are bearish, and an event triggers the public to jump onto the bears’ wagon, it is time to consider the road less traveled. And Tuesday (Sept. 1) was just such a day.
Following a massive sell-off in China, the widely publicized Ned Davis Report seemed to say that anyone who even thinks of buying a stock in September has to be nuts, and so the market tanked.
But one day of selling by weak holders is no reason to panic, especially when the selling lacked the follow-through that normally accompanies a serious correction. Wednesday (Sept. 2) resulted in a mild loss on the Dow, but with more stocks up than down. And, on Thursday (Sept. 3), buyers emerged in the last hour, driving stocks up by almost 100 points.
>
The widely followed CBOE Volatility Index (VIX), after popping almost 4 points on Tuesday, gave back virtually all of its gains on Thursday.
And our own internal indicator, the Collins Bollinger Reversal (CBR), flashed buy signals on the Dow and the Nasdaq, putting the bulls back in charge.
Oh, and the American Association of Individual Investors (AAII) sentiment numbers changed in one week from being very bearish to neutral.
Once again, the bull channel that I’ve referred to in almost every Daily Market Outlook in the past week has held. We won’t know for certain that the bulls are ready for a stampede until after Labor Day, but until then, I’d rather be long than short.
Today’s Trading Landscape
Earnings to be reported include: ATA (ATAI) and H&R Block (HRB).
Economic reports due: non-farm payrolls (the consensus expects -233,000), and unemployment rate (the consensus expects 9.5%).
3 Cheap, Recession-Busting Stocks. These low-priced stocks are truly undervalued. Get in now — before they’re discovered and take off!
