For more than a year, the Dow Jones Industrial Average (DJI) has been under 10,000, and in March most thought that it would be years before they would ever see that number again. But yesterday, following Q3 earnings from Intel (INTC) that far exceeded estimates, the Dow smashed through the barrier with broad-based buying on increased volume and closed at 10,015.86. It was its highest close since Oct. 3, 2008.

In addition to Intel, which beat Q3 estimates by 6 cents and upped its Q4 revenue estimate, JPMorgan Chase (JPM) exceeded analysts’ estimates by 30 cents a share. Analysts covering JPM had expected the big bank to earn 52 cents, and it came in at 82 cents a share.

And the better earnings continued with Abbott Labs (ABT) and CSX Corp. (CSX) topping analysts’ numbers. Many felt that the Abbott results offset the poor results of Johnson & Johnson (JNJ) the day before.

Retail sales for September were up 0.1% month-over-month, and business inventories for August fell more than expected.  

The Fed’s minutes from the meeting on Sept. 23 show that the governors believe that even though the economic outlook has improved, it is still “quite weak.” 

The U.S. dollar again closed the day lower, setting a new 52-week low.

But traders cheered on the floor of the NYSE as the Dow closed at 10,015.56, up 145 points. The S&P 500 (SPX) gained 19 points to close at 1,092, and the Nasdaq (NASD) rose 32 points to 2,172. 

The NYSE traded 1.4 billion shares with advancers over decliners by 3-to-1. The Nasdaq crossed 731 million shares, and it, too, showed advancers ahead by 3-to-1.

November crude oil was $1.03 higher at $75.18 a barrel, and the Energy Select Sector SPDR (XLE) rose to a new annual high at $57.96, up 95 cents. 

December gold fell 30 cents to $1,064.70, while the PHLX Gold/Silver Index (XAU) fell 3 cents to $179.24.

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What the Markets Are Saying

Every one of the major indices broke to new recovery and annual highs yesterday, sparked by better-than-expected earnings in major companies in two important sectors — banking and technology. 

The Wall Street Journal reported that a spokesman from T. Rowe Price said “people were impressed with the results from Intel and J.P. Morgan, particularly J.P. Morgan.” But Intel’s report could have more global impact than the surprise by Morgan. First, because if a bank has any basic foundational strength at all, it should make money when it is getting it from the Fed at practically no cost (to be fair, the big gain was from investment banking). But the progress by Intel means that demand is increasing and that has a broad ripple effect. 

A follow-up story from AP says that worldwide shipments of PCs in the third quarter improved, and that this “is a promising sign as the industry heads into the holiday season.”

The new recovery highs of the major indices signal that the advance will likely continue for several more days before profit-taking reverses back to the support line of the bull channel, and our internal indicators tend to corroborate that (see yesterday’s Daily Market Outlook). But as prices near the top of a channel, I tend to rely on the Relative Strength Index (RSI) to tell me when to exit.

I’ve covered the RSI several times and noted that an extreme overbought condition is above 80, but that high value is usually associated with major market turns. The last two peaks in the bull channel were at 75.70 in August, and then 72.18 in September.

I guesstimate that a top at S&P 500 1,120 is likely since that represents a 50% retracement of the full bear market, connects the tops of the bull channel with the three prior tops, and will most likely result in an RSI reading of above 70. The RSI is now 67.18.

Ride the bull, but get ready to exit for a refreshment break.

Today’s Trading Landscape

Earnings to be reported include: Advanced Micro Devices, American River Bankshares, Amphenol Corp., Bridge Capital Holdings, Capitol Bancorp Ltd., Citigroup, Cubist Pharmaceuticals, CVB Financial Corp., CyberSource Corp., Cypress Semiconductor Corp., Cytec Industries, Durect Corp., Fairchild Semiconductor International, First Financial Bankshares, Google, Harley-Davidson, Home BancShares, IBM, Knoll, KVH Industries, LG Display Co. Ltd., Nokia Corp., Omniture, PacWest Bancorp, People’s United Financial, Polaris Industries, Popular, PPG Industries, Robert Half International, Safeway, Shore Bancshares, Southwest Airlines Co., Tempur-Pedic International, Tomra Systems A.S.A., TradeStation Group, Ultratech, Umpqua Holdings Corp., Universal Forest Products, USA Truck, Valmont Industries, Watsco and Werner Enterprises.

Economic reports due: jobless claims (the consensus expects 520,000), consumer price index (the consensus expects 0.1%), NY Fed Empire State Manufacturing Survey (the consensus expects 17.5), DJ-BTMU U.S. Business Barometer, Philadelphia Fed manufacturing index (the consensus expects 12.5), EIA natural gas inventories and US Energy Department oil inventories.

Late News: Goldman Sachs (GS) reported Q3 earnings of $5.25 versus an estimated $4.24. Winnebago (WGO) reported 19 cents versus an estimated 24 cents. Baxter International (BAX) reported 98 cents versus an estimated 97 cents. 

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