Stocks advanced for the second day in a row, backed by a fresh batch of positive economic and earnings news and a bounce back in technology stocks. The S&P 500 [SNP:^GSPC] closed 20.2 points higher, or +1.1%. The tech-heavy Nasdaq composite gained 71 points, or + 1.7%, and the Dow Jones Industrial Average [DJI:^DJI] advanced 181 points or 1.1%.
With the exception of the S&P being unchanged on the year, not much has changed. Yes, there has been a higher frequency of down days and yes, some have been big. In fact there have been 4 +20 handle selloffs since December and 2 drops of over 42+ handles this year and numerous 10- and 15-handle drops. So, it’s not like the S&P isn’t moving. It’s just not going anywhere. What I told the PitBull yesterday was that nothing has changed—the S&P sells off, it stops, backs and fills, and moves back up again.
Don’t fight the trend
I started writing the top part of today’s email at 9:00PM Wednesday. Obviously, I could not add the net changes but it was my “feel” for the markets that pointed out Tuesday afternoon’s “back and fill” price action and it was the very same feel that allowed me to write much of today’s report early. Charts and moving averages are great but if you have the wrong direction it really doesn’t matter.
Not only did the major indices see a big snap back yesterday but the same sector that led the markers lower at the end of March and into the first trading days of April saw a big bounce too: the Nasdaq Biotechnology Index that was down 6.5% in the previous 5 trading days gained 4.1%. They say the buyers came back looking for bargains but it turned into a stampede.
The Asian markets closed mostly higher and the European markets are mixed to slightly higher. Today’s economic calendar starts with the Chain Store Sales numbers, Jobless Claims, Import and Export Prices, EIA Natural Gas Report, Chicago Fed President Charles Evans on panel discussing central banking after the recession, in Washington, 30 Yr-Bond Auction, Treasury Budget, Fed Balance Sheet and Money Supply.
We should be used to the fact that after the S&P sells off it goes right back up. Sure the bears get to eat but it’s scraps compared to what the bulls get. The S&P sold off for two days, down over 44 handles, but when you look at the S&P overall it’s been up 7 out of the last 9 sessions. The short sellers got run over again! Our view is that the S&P looks great and that must mean we pull back a little. Sell the early rally and buy weakness and keep a look out for the PitBull’s Thursday /Friday low the week before the April expiration.
Remember; the S&P tends to go sideways to down after a big up day.
Webinar Today at 2:15PM CT!
Please join us for today’s 2:15PM CT webinar with MrTopStep’s Marlin Cobb (aka RedLionTrader) featuring the MiM (MrTopStep Imbalance Meter). This will be a rare opportunity to hear from someone who not only designed the MIM but trades it every day.
As always, keep an eye on the 10-handle rule and please use stops when trading futures and options.
- In Asia, 9 of 11 markets closed higher: Shanghai Comp. +1.38%, Hang Seng +1.51%, Nikkei unchanged
- In Europe, 8 of 12 markets are trading higher: DAX +0.12%, FTSE +0.19%
- Morning headline: “S&P 500 futures seem lower ahead of jobless claims and trader data”
- S&P Fair Value: 1865.78 (futures 3.03 lower at 1862.75 as of 6:25AM CT)
- Total volume: 1.4M ESM and 5.3K SPM traded
- Economic calendar: Chain Store Sales, Jobless Claims, Import and Export Prices, EIA Natural Gas Report, Charles Evans speaks, 30-Year Bond Auction, Treasury Budget, Fed Balance Sheet and Money Supply.
- E-mini S&P 5001825.00+13.25 - +0.73%
- Crude103.92+0.18 - +0.17%
- Shanghai Composite0.00N/A - N/A
- Hang Seng23038.801+35.16 - +0.15%
- Nikkei 22513910.16-49.89 - -0.36%
- DAX9320.74+5.45 - +0.06%
- FTSE 1006571.73+10.03 - +0.15%