Stocks rallied to the upside Thursday, coming out of a base created for almost the entire month of January, as a trio of economic reports had enough good data to help push the indexes up. Weekly jobless claims came in far below expectations while housing starts came far above, which was enough to offset a poor regional Fed survey. For the day the S&P 500 added 0.56% and the NASDAQ 0.59%. There was some late day selling to take stocks off their best levels.
Today's action was a continuation up move out of a 10 day base that has been building since Jan 2nd for the S&P 500.The problem with such a huge move the first day of the year was that it didn't leave much more room to the upside before a series of resistance issues arose. Hence the best resolution for bulls was sideways action which was the situation the past few weeks. Out of that "bull flag" came today's move up. And now resistance becomes support - one can buy against those highs of the past week on the S&P 500; if that level breaks than the situation becomes thorny but there is defined downside risk now.
The NASDAQ is a similar situation although it has only now reached late March 2012 highs (I have been calling them April 2012 highs incorrectly - only the S&P 500 made a new high in April; the NASDAQ peaked late in March).
Financials were very much in play Thursday as both Bank of America (BAC) and Citigroup (C) reported. The results were not as good as we saw Wednesday with Goldman Sachs and JPMorgan. No surprise as these former two companies are not considered as high quality.
That said, the ETF for the index of the major global banks continues to be a star and recent leader. It will be important to monitor go forward, because if it weakens, it could be a canary in the coal mine. For now it is just a day of underperformance and a bull flag continues to build.
After the close chip bellweather Intel (INTC) reported and disappointed sending shares down 5% in after hours (after initially being up 4%). However it had run substantially into the report so a price in the mid $21s only takes it back to where it was last week.
A good time to highlight two commodities - we've mentioned how oil has been stagnant for a long time; well today it finally broke out of the $94s range that has been an issue. It is a good idea to wait for confirmation that this move is true, but if it holds over the next few sessions this could be the beginning of a significant move in the commodity. If it just rolls back over, then this is simply a headfake. As with the S&P 500, resistance becomes support so one can trade against this ~$94 level.
Dan Zanger mentioned gold in his newsletter yesterday and has essentially said what we've been saying in the multi year chart below. Gold is currently adrift and while the pattern may be attractive at some point, there is no rush now to get involved.
Gold continues to build out a nice and long Descending Channel pattern. This pattern often leads to higher prices in time though no telling when that time will start and until it does I'm on the sidelines.