Market Wrap: Another Big Rally
The housing sector breathed a huge sigh of relief, and the housing index (HGX) surged +8.1% on the day. That is an enourmous one-day relief rally, even as it comes of a very depressed level.
Yesterday was a classic "follow through" day if you follow the William O'Neil school of investing. What that means is that last week the market staged an initial rally attempt. And yesterday, we got a strong follow through in the form of a big up day in the market on rising volume. These follow through days have a good history of marking a new uptrend in the market.
Today, the action in the S&P 500 Index (SPX) was great from a technical standpoint. The SPX had been running into resistance near the 1480/90 level (see chart above). Yesterday, it closed right at that level.
But today, not only did it rally through that resistance (and its 200-day average), but it rallied all the way above its overhead 50-day average as well. That eats away a lot of overhead resistance, and paints a bullish pattern from which the market should continue to find support.
Also notable to this observer was the fact that the volatility index (VIX) plunged -7% on the day, and broke below its 50-day average. If the VIX continues to drift lower, it should support further rallies in the market. Ditto for the Yen, which we talk about on a daily basis now.
Remember we called this market bottom on November 20th, which was a few days early, but market a great time to add to your long exposure. The SPX is already 5% higher off those levels. I think this setup bodes well for a continued rally into year-end.
In terms of the jobs report tomorrow, the consensus is looking for +70,000 jobs. I would be taking the "over"...