The Dow Industrials (INDU) are trying to hold onto gains this morning, but the S&P 500 (SPX.X) and NASDAQ Composite (COMPX) are trading just below the break-even mark. Smaller-cap stocks as represented by the Russell-2000 (RUT.X) are also treading water and are down fractionally in early trading.
Dow Industrials Chart - last eleven months
A chart of the Dow Industrials shows this index is hovering right around our "confirmation" level (C ) near 11,000. This became a sticking point yesterday when the markets were in high gear. The chart is still somewhat bullish as our intermediate-term downward trend (B) has been broken, but the overriding trend (A) is still down. Short-term the trend is up as represented by trend (D). To make it clear. Short-term trend (D) is bullish, but longer- term trend (A) is still bearish. Traders that want to take a neutral stance here won't find any disagreement from me.
S&P 500 Index Chart - last eleven months
The technicals for the SPX.X are still pretty simple. The overriding trend is down, but a short-term upward trend is now in place. Purely from these technicals, traders holding bullish positions should be snugging up stops. Traders that like to trade the bearish side of the market can do so here with a clear stop on a break above the 1,351 level.
NASDAQ Composite Index Chart - last eleven months.
The technicals are very simple in the NASDAQ Composite too. Overriding trends are negative and we'd be hard pressed to find any type of upward trend currently. Traders looking for an upward trend might find it in a 30-minute chart, but should realize that it would be short-term in nature.
For months, I've rated the Dow Industrials as the strongest index on a technical basis, with the S&P 500 and NASDAQ Composite trailing in respective order. At some point a pullback will occur and I'd expect a pullback to more drastic in the NASDAQ Composite. This should be expected as the advances, when they come, are more pronounced in the NASDAQ. As long as traders know what to expect, they can manage their trading accordingly, but should not have a false impression that the sky is the limit for the NASDAQ. The NASDAQ has not started to build anything that currently looks like a base and we've been hearing for months that bottoms have been found (4,000 then 3,000 and now yesterday's low of 2,252). When some downward trends start getting broken to the upside, traders can then become more aggressive with their buying. Until then, be willing to trade for profits and build your account with discipline. Plan the trade and trade the plan!
Foreign markets join yesterday's party
Asian/Pacific stock markets jumped on the bandwagon following the unexpected interest-rate cut by the Federal Reserve in the U.S. The cut ignited a huge rally on Wall Street and quickly spread globally. With the exception of the Japan, the region's key indexes racked up large gains on news that the Federal Reserve lowered the federal fund rate to 6% from 6.50% and reduced the discount rate to 5.75%, a decrease of 25 basis points. Hong Kong's Hang Seng rose 4.42%, South Korea's Seoul Composite added 7.02%, and Taiwan's Taiwan Weighted advanced by 4.93%. Japan's Nikkei 225 lost 0.68% as continuing fears over the health of the economy capped market sentiment. Europe's tech sector held its 10% gain in afternoon trading Thursday, but other sectors eased back with Wall Street expected to open lower. Many investors were extremely happy to see a recovery, but were now expected to see some profit-taking. France's CAC 40 increased by 2.01%, Germany's DAX was down fractionally, London's FTSE 100 rose 2.15%, Finland's Helsinki General added a whopping 10.3%, and Turkey's ISE National-100 rose 9.84%.