The Nasdaq Blasts Through 6,000 to New Highs

Earnings, earnings, and more earnings topped the list of reasons why the major indices, especially the Nasdaq and the S&P 500, soared on Tuesday.

Bank of America Corp (NYSE:BAC) reported that the number of companies beating analysts’ estimates for EPS and revenues rose to the highest level in five years. This drove the S&P 500 to a second-day gain of 0.6% and a weekly gain of 1.7%.

Yesterday the Dow Jones Industrial Average rose 1.1%, their biggest daily gain since March 1, Nasdaq rose 0.7% to a new high, and the first time the index has closed above 6,000.

Dow member Caterpillar Inc. (NYSE:CAT) jumped 7.9% after management increased forecasts for this year. McDonald’s Corporation (NYSE:MCD) rose 5.6% after a sales increase was announced. E I Du Pont De Nemours And Co (NYSE:DD) added 3.6% after beating both top and bottom lines. And even the lagging biotechs got a boost from Biogen Inc (NASDAQ:BIIB), up 3.6%, due to its exceeding both revenue and EPS estimates. The iShares Nasdaq Biotechnology Index (ETF) (NASDAQ:IBB) gained 1.3%.

Ten of the eleven sectors of the S&P 500 gained, with only the defensive utility sector off 0.04%. The leading sector was energy, up 0.98%.

At the close, the Dow Jones Industrial Average jumped 232 points at 20,996, the S&P 500 rose 14 at 2,389, the Nasdaq gained 42 points to close at 6,025, and the Russell 2000 closed at 1,411 for a gain of 13 points. The NYSE’s primary exchange traded 929 million shares with total volume of 4 billion shares, and the Nasdaq crossed 1.9 billion shares. On the Big Board, advancers outpaced decliners by 2.1-to-1, and on the Nasdaq, advancers led by 2.2-to-1. Blocks on the NYSE increased to 7,495 from 7,360 on Monday.

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The Nasdaq Blasts Through 6,000 to New Highs

With a bullish “Break-Away Gap” followed by a “Continuation Gap,” the Nasdaq hit a new milestone, blasting through 6,000 to uncharted territory. The successful test of the 50-day moving average at about 5,860 was highlighted by a bullish “W” pattern that is widely recognized as significant only after breaking a neckline, this time at about 5,920.

Conclusion: Even though the Nasdaq is the sole achiever of a new high, its reflective power, especially in the technology sector, is significant. Gaps, both Break-Away and Continuation, occurred on the Dow Jones and the S&P 500, and that means that the Russell 2000, which missed a new high by a fraction, will also jump to uncharted territory.

Since the buy signal has been issued, we should not ignore it. Banks and other financials, as well as technology stocks, are prime candidates for cash that was squirreled away for this event. The bullish backdrop that took five months to form has finally broken out. But continuation gaps are often closed, and so as we review our lists of stocks to buy, the bottom of the second gap is usually a good entry point.

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.

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