Indexes gapped up at the open, rallied a bit more mid morning, and stayed steady the rest of the session. The S&P 500 gained 0.67% and the NASDAQ 1.02%. This marks the third significant up day out of four from last Thursday’s extreme oversold conditions. We shall soon see if this is another “V shaped” bounce as we saw throughout 2013, where the market broke down for a quick correction and once it turned back up it was straight up for a few weeks. That has no really been the case in 2014 other than for a few weeks in June. Today’s rally came in the face of a miss in the key retail sales figure – but it seems people are back to the “modest economic data means the Federal Reserve sticks around longer” thesis.
The Commerce Department said that retail sales, which had increased 0.2 percent in June, were flat in June – held back by a second straight month of declines in receipts at auto dealers. July’s reading was the weakest since January. JPMorgan estimated that second-quarter growth would be cut by 0.4 percentage point.
The S&P 500 won’t face a serious resistance until it bounces back up to the trend line it broke recently; this has climbed from the 1960s area to the 1970s area in the past few days. If and when it gets there let’s watch the behavior – if the index rips right through it to the upside, we probably are in store for one of those V shaped bounces that happened constantly in 2013. If we see a rejection, that would show some signs of weakness. The NASDAQ on the other hand already has some bullish tint to it – it is not too far from that “double top” it broke down from.
Here is the NYSE McClellan Oscillator – in four days it has gone from the -80 area to +20. Staying above zero would be a good sign for the bulls.
Intel (INTC) was one of the key name helping push the NASDAQ higher today, along with Apple (AAPL).
Biotechs, as expressed by the ETF IBB, also helped the NASDAQ in particular.
In the retail area, Macy’s (M) reported quarterly earnings that missed analysts’ estimates and slashed its full-year same-store sales forecast.