In Thursday’s pre-market report we noted that the market was ripe to rally, little did we know the Dow would soar nearly 300 points by the close. That’s just the way Wall Street works, when people want to step up and buy, they buy. Conversely, when people want to sell, they sell first and ask questions later.
The 50 day moving average line is the next line in the sand to watch. On a relative basis, the Nasdaq and Nasdaq 100 continue to out-perform the other popular indices. The important levels of support to watch are: Russel 2000: 1335, then 1308, Dow Industrials: 20.4k, then 20.1k, S&P 500: 2322.25, then 2300, Nasdaq Composite: 5769.39, then 5669. Until those levels are breached on a closing basis, the bulls remain in control.
A Closer Look at What Happened Last Week…
Mon-Wed Action:
Stocks edged higher on Monday led by financial stocks as investors waited for a slew of earnings to be released. Vice President Mike Pence said the “era of strategic patience” with North Korea was over but that failed to rattle markets. Pence made the comments on the border between North and South Korea a day after North Korea’s failed missile test. The Trump administration has made it clear that it is actively working with China and its allies on a response to North Korea’s missile program.
The Dow fell 100 points on Tuesday after Goldman Sachs (GS) and Johnson & Johnson (JNJ) both fell after reporting earnings. Stocks closed mostly lower on Wednesday as investors continued to digest the latest round of big-cap earnings reports. This time, IBM dragged stocks lower after reporting earnings.
Thur & Fri Action:
Stocks jumped nicely on Thursday after Treasury Secretary Steven Mnuchin hinted a tax deal may be reached sooner than expected and the latest round of earnings were released. Mr. Mnuchin said the administration was close to “major tax reform” which came after changed his earlier goal of passing tax reform by August. The White House said it will unveil a plan “very soon” and that was enough to send stocks sharply higher.
Stocks were quiet on Friday after legendary Hedge Fund manager, Paul Tudor Jones, said, “U.S. Stocks Should ‘Terrify’ Janet Yellen,” and made the case that stocks were very over-valued.
Market Outlook: Market Breaks 50 DMA Line
The market is pulling back after a very strong post-election rally. As always, keep your losses small and never argue with the tape.
