Market Analysis

Stocks surged as the mortgage crisis appears to be subsiding.  Investors even liked Citigroup’s loss as it was not as bad as originally predicted.

• Bond yields jump, dollar firms, gold plunges: what the markets outside stocks are telling you.
• Price surges to come: how the government tied food prices to energy prices and how we are all going to pay the price.
• NASDAQ, SP500 breakout will confirm a continued rally near term.

Earnings provided the trigger for a breakout in many sectors. 

After a weak start that led to a deeper pullback from the rally, a pullback that left investors uncomfortable enough to wonder if the rally could continue, earnings started to come through this past week.  IBM, JPM, GOOG, INTC, CAT and HON all posted earnings and guidance that showed a stronger future than the general mood of the market was giving the economy credit for. Even misses by SLB and C were viewed in favorable light, indicating that the build off the lows with leadership and good price/volume action underpinning the move, as well as other factors at work as discussed below, are driving prices higher despite the concern about the US economy. This could very well be just a relief move in a larger bear market, but for now there are a lot of good stocks in good patterns making solid advances. Hard to argue with that regardless of what is driving it.

Stocks gapped higher on the earnings, fought off an early selling attempt, and rallied to new session highs in the afternoon. It was expiration and in the afternoon the market sagged as some expiration reshuffling occurred given the strong market recovery in the second half of the week. That pullback kept NASDAQ and SP500 from taking out their early February highs, but they did clear some important resistance milestones on the Friday move. DJ30, following the breakout Wednesday by the Dow Transports (DJ20), broke out as well, as it broke a hole in that ceiling at 12,750, doing so on stronger, above average volume. NASDAQ showed solid above average trade on its break higher as well, the first above average trade in a month.

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