The U.S. market is hitting new ten-month highs thanks to positive comments from Federal Reserve Chairman Ben Bernanke. A much better than expected existing home sales report certainly didn't hurt either. The U.S. dollar continues to sink and this time commodities are surging with oil rising toward $74.00 a barrel.
Asian markets were mixed. The Chinese Shanghai market continued to bounce after plunging almost 20% in two weeks. The Shanghai rallied almost 1.7% on Friday following Thursday's big 4.5% rebound. There were some jitters over the banking stocks and the possibility that the government might tighten lending standards. The Hong Kong Hang Seng lost 0.6% to end a rocky week. Investors are still uneasy in Japan. News that the U.S. government would end the "cash for clunkers" program this coming Monday put a damper on the Asian automakers, which had been seeing a lot of success as Americans bought more fuel-efficient foreign cars. The Japanese markets are also facing uncertainty as the country's general election approaches on August 30th. The NIKKEI index lost 1.4%. European markets were very strong with the English FTSE gaining 1.9%. The German DAX rallied 2.8%. The French CAC-40 soared 3.1%.
Ben Bernanke made headlines as the media followed the Fed's annual conference in Jackson Hole, Wyoming. Bernanke seemed to give the markets the "all clear" signal when he said the U.S. economy was finally poised to return to positive growth. Ben reminded his audience that while the worst is behind us "difficult challenges still lie ahead." The bond market stumbled as investors left the safety of treasuries for the stock market.
The National Association of Realtors reported their July Existing Home Sales numbers. Estimates were for a rise to a 5 million unit pace. July came in at 5.24 million, a 7.2% jump. This was the fastest sales pace since 2007 and July was the biggest one-month surge in a decade. July's report also marked the fourth monthly gain in a row. Optimists are hopeful that this signals the end of the housing slump. Unfortunately a lot of sales were fueled by first-time homebuyers jumping in to take advantage of an expiring tax credit program. The worry here is that we may have pulled forward sales from the future. Even though this was a report on existing home sales the new homebuilders rallied anyway. The DJUSHB home construction index is up 3.1%.
Yesterday commodities ignored weakness in the U.S. dollar. That's not true today. A sliding dollar is fueling big gains for the commodities. Oil is up. Gold is up. Copper futures are up a sharp 4%. Grains are up. Actually the whole market is up. The transports are up 2.2% and nearing their August highs. The banking stocks are breaking out to new highs for the year. Drug stocks have hit new 2009 highs. Insurance stocks are hitting new 2009 highs.
Currently the S&P 500 index is up 1.5% and trading sideways after breaking through resistance near the 1,020 level. The NASDAQ composite is up 1.1% and testing its August highs. The Dow Industrials are up 1.4% and trading at new 2009 highs near 9480-9500. The small cap Russell 2000 index is up 1.8% at new 2009 highs around 580.
Let's take a quick look at charts for the major averages:
Chart of the S&P 500:
Chart of the NASDAQ:
Chart of the Dow Industrials:
Chart of the Russell 2000 index:
A quick look at the OptionInvestor.com play list reveals that FISV has hit our trigger to buy calls at $48.60. FLR has surpassed our first target to take profits at $54.80. Railroad stock GWR is up 5% and breaking out past the $30.00 level. With the market in rally mode many of our put plays aren't performing so well but solar stock FSLR is actually down almost 6% and very close to our target at $122.50. Readers may want to start taking profits right now before Friday's closing bell.