Quite a shocking type of rally today considering the extreme overbought levels indexes showed coming into the day. Markets gapped up at the open and just kept on going; the S&P 500 rocketed up 2.39% and the NASDAQ 2.89%! It was an ok day for data and oil, etc but certainly nothing that on the surface would warrant this. February ISM manufacturing came in at 49.5, about 1 point above expectations and topping January’s 48.2 print. However, the figure still remained below the 50 contraction-expansion level. Construction spending rose 1.5% in January to its highest level since 2007.
“I think it’s near-term price action, possibly some chart chasing, momentum chasing, which continues to forge us higher into the close,” said John Caruso, senior market strategist at RJO Futures. Stocks are rising “on really nothing … that would warrant a (more than 2) percent rise in stocks today,” he said.
“The ISM report showed that manufacturing is getting worse at a slower rate, it’s still contracting. But the fact that it’s not deteriorating rapidly is reassuring to investors,” said Mike Antonelli, equity sales trader at R.W Baird & Co.
Fun fact: March & April are traditionally one of the best periods for the market.
March is historically a good time for stocks, but April is the strongest month, according to Bespoke. The S&P 500 has generally had its best two-month gain — an average 2.66 percent — over the March and April period. The second-best two-month period is November to December, which averaged a 2.61 percent gain. In years when the S&P is down in the first two months of the year, the following two-month performance was still strong — up an average 2.58 percent, Bespoke noted.
Did you know? This has been the 3rd most volatile start to a year in history.
According to Bespoke, the number of days with 1% moves in the S&P 500 so far this year totals 23, the third-highest ever in the first two months of trading. Years that were higher were 1932 and 2009.
The S&P 500 broke over this 1950-ish level it had failed at last week with gusto. That seemed to cause short covering and momentum chasing. The index then rallied all the way to what would look like a random level to most people – but you can see on our chart, nearly exactly to our upper long term trendline in blue. This has been a powerful move off the bullish double bottom – certainly more powerful than I expected. The NASDAQ also burst over its long term support / resistance trendline in blue, along with surging over the 50 day moving average. Bulls should be giddy with today’s action.
“I think when we broke 1,955 on the S&P that got us moving in the right direction. I think you saw a lot of people covering shorts at 1,955,” said Peter Coleman, head trader at Convergex.
We said yesterday it was difficult to get bullish on the market in the next few days because we were extremely overbought once more. Well that was incorrect! Here is a 3 year chart for the NYSE McClellan Oscillator – this is only the second reading over 90 in those 3 years. And one only sees 4 instances over 80… so we are in rarefied air.
Ten year treasury yields shot back up over 1.80%.
Here are some individual stock charts, courtesy of our friends at MarketSmith:
Apple (AAPL) regained $100 and the 50 day moving average.
It was not quite such a nice day for Tesla Motors (TSLA) as noted short seller Citron announced a short position.
In a tweet, the short-selling firm contended that Tesla shares could fall to roughly half their current value by the end of the year due to supply and demand problems. The “news flow all around does not look good” for Tesla, Citron wrote.
Ford (F) was a winner today as it announced splendid year over year sales growth.
Sales in February shot up 20% to 216,045 vehicles, the best February retail sales in 11 years.
United Technologies (UTX) had been bid up a few weeks back on news of a Honeywell (HON) takeover; today that speculation was squashed.