As the framework of a deal in D.C. comes to fruition at the last minute (try to act surprised), the S&P 500 and NASADQ had bountiful sessions with gains of 1.38% and 1.20% respectively. As we have been mentioning, if last Wednesday was a bottom, if the recent pattern of rallies continues we'll see a move of 12-14 sessions of nearly vertical move up. It is not supposed to work like that but Quantitative Easing markets tend to be violent to the upside in the initial bounce. Yesterday was a bit of a curveball but that was due to some stalling in negotiations - today would be session 5 of the current rally. Tomorrow will be a good test because after the bell IBM - which is very heavily weighted in the Dow Jones Industrial Average - reported some disappointing numbers and we will see how quickly dip buyers show up if there is even a dip.
On the economic front, homebuilder sentiment slipped to 55 in October, touching the lowest level since June, according to the NAHB/Wells Fargo Housing Market Index, amid worries over Washington and higher labor costs. Economists polled by Reuters had predicted the index would remain flat at 58.
Both the S&P 500 and NASDAQ are now back in breakout mode which is bullish. The S&P 500 is on day 4 of a breakout...
NASDAQ is on day 3 of a breakout above this descending channel (blue line)
Transport stocks are likewise breaking out - something bulls like. Day 4 here.
The volatility index - which we mentioned was breaking out last week (bearish), reversed and today imploded as uncertainty on the debt deal moves away.
Financials had been a laggard during this correction but this sector is acting quite well the past few sessions.
We also mentioned energy had been showing a lot of relative strength along with health care - these are already above highs earlier in the year.
Have to mention one of the four horsemen as these have been leaders of the market - here is Facebook (FB) with a stellar session.
Now to IBM which is down to the mid $170s range in after hours. The stock has been weak for a long time and reported a revenue miss of $1B after the bell.
IBM, the world's largest technology services company, reported third-quarter earnings that beat Wall Street estimates, but it missed revenue expectations due to a decline in its hardware business and in emerging markets. International Business Machines Corp said on Wednesday its quarterly net income rose 6 percent to $4.0 billion, or $3.99 a share on a non-GAAP basis from $3.62 a year earlier, above estimates of $3.96 a share, according to Thomson Reuters. Revenue dropped 4 percent to $23.7 billion below Wall Street analysts' expectations of $24.74 billion mainly due to a decline in its hardware division.
Here is the daily chart...
...and you can see how it acted negatively immediately via this intraday chart from Thinkorswim by TDAmeritrade.