Stocks rallied Tuesday with a boost from the energy sector. Crude oil rose 4.5% to $42.17 a barrel, the highest close since November, on speculation that the major oil producers can come to an agreement on freezing production when they meet this weekend.
The energy sector was the day’s best performer, up 3%. And Chevron Corporation (CVX) was the best performer on the Dow Jones Industrial Average, climbing 2.3%.
Financials also outperformed, up 1.3%, as bargain hunters snatched up bank stocks, especially those that are tied to the oil patch.
But despite Tuesday’s strong showing in beaten-down energy and financials, investors seemed to cool toward most other groups.
Gold was up 0.2% at $1,259.40 an ounce. And the yield on the 10-year Treasury note rose to 1.79% from 1.73% on Monday as bonds sold off in reaction to the rally in crude.At Tuesday’s close, the Dow Jones Industrial Average gained 165 points at 17,721, the S&P 500 advanced 20 points to 2,062, the Nasdaq rose 39 points to 4,872 and the Russell 2000 was up 11 points at 1,106.
The NYSE Composite’s primary exchange traded 841 million shares with total volume of 4.2 billion. The Nasdaq crossed 1.7 billion shares. On the Big Board, advancers outpaced decliners by 3.9-to-1, and on the Nasdaq, advancers led by 2.1-to-1. Block trades on the NYSE increased to 7,698 from 6,109 on Monday.
Despite a lack of momentum and a sell signal from my proprietary indicator, the Collins-Bollinger Reversal (CBR), SPDR S&P MidCap 400 ETF (MDY) appears to be holding firm. By that I mean MDY is supported by its 20-day moving average. Unfortunately for the bulls, however, buyers are scarce, except in beaten-down stocks.
There are still buyers with cash. The problem is that they have run many of the popular sectors to the top of their ranges. The most recent example of this is the precious metals group (see the Trade of the Day). Perhaps the next target for bargain hunters is biotechnology stocks.
Note the clear double-bottom on the chart of the iShares NASDAQ Biotechnology Index (ETF) (IBB). Buyers are increasing, and the 20-day moving average crossed up through the 50-day, a short-term buy signal.
Conclusion
Don’t chase stocks; buy them on double-bottoms and not breakaway tops.
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.
