Stocks rallied again Tuesday despite a gloomy view of U.S. and European growth. The rally was no doubt influenced by hints from Fed Chairman Ben Bernanke that he still had enough ammunition to fight off a sagging economy as he listed the economic indicators that might trigger more stimulus. The market forged ahead following Bernanke’s testimony before the Senate Banking Committee as the details of his testimony were reviewed and his lack of specifics discounted.
At Tuesday’s close, the Dow Jones Industrial Average was up 78 points at 12,806, the S&P 500 gained 10 points at 1,364, and the Nasdaq rose 13 points to 2,910. The NYSE traded 696 million shares and the Nasdaq crossed 454 million. On the Big Board, advancers were ahead of decliners by more than 2-to-1, and on the Nasdaq, advancers led by 1.3-to-1.
Tuesday’s impressive rally, following a negative economic outlook by Bernanke, reversed two indicators of the broad-based S&P 500. The S&P 500’s 20-day moving average crossed above its 50-day moving average over one week ago, triggering a short-term buy signal. And Tuesday’s recovery reversed last week’s MACD sell and also confirmed a short-term buy signal from the stochastic. The tangible nature of these signals against a gloomy forecast strengthens the bulls’ position and puts the downtrend line at 1,370 in sight.
Conclusion: Beginning in May, the S&P 500, as well as other key indices, established a series of higher highs and higher lows, creating a bull channel within an overall symmetrical triangle.
On Tuesday, it was clear that the psychology of the market had turned positive when bad news was treated favorably, a strong indication that the bears are tiring. Thus the intermediate trend that has its floor at 1,320 and ceiling at 1,370 is under an upside attack.
What the bulls require to make the run successful is additional volume and solid positive breadth. If they can muster both, along with some enthusiasm, they could even make a run on May’s closing high at 1,406
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.
