Commenting on today’s trading which saw the Dow near 29000, Gorilla Trades strategist Ken Berman said:
It seems that the resilience of domestic stocks continues to be impressive, as it only took a few days to completely erase last week’s scary sell-off. It wasn’t that long time ago that we celebrated Dow Jones Industrial Average (INDEXDJX: .DJI) 28000, and thanks to today’s broad rally, the industrial average got very close to topping 29000, and bulls already have the historic 30,000 level in their crosshairs.”
The major indices all finished in the green for the second day in a row, and the large-cap benchmarks also closed at their highest levels ever, boosted by the de-escalation between the U.S. and Iran. The Dow was up 212, or 0.7%, to 28,957, the Nasdaq gained 74, or 0.8%, to 9,203 while the S&P 500 rose by 22, or 0.7%, to 3,275. Advancing issues outnumbered decliners by an almost 3-to-2 ratio on the NYSE, where volume was slightly above average.
Even though the major indices finished below their intraday highs, due to a shallow afternoon dip, all of the key sectors gained ground, with even the defensive utilities edging higher. Tech stocks, consumer goods, and services were the strongest issues, which is as healthy as it gets when it comes to bull market rallies. The relative weakness of small-caps was the only major red flag today, and despite the fact that large-caps continue to hit record highs, the Russell 2000 remains much weak from a technical perspective.
Dow 29000 this week?
The Volatility Index (VIX) hit its lowest level since last week’s airstrike and as short interest continues to decline on Wall Street and analysts agree that there is no lack of risk appetite among equity investors. That said, we did have several short-lived pullbacks in recent weeks that made sure that the positive sentiment hasn’t turned into exuberance. In fact, the positive shift in global economic trends provided another boost for stocks, just after the trade agreement between the U.S. and China. While the lofty gains will eventually lead to a deeper correction, until the bullish catalysts keep on coming, the foundation of the rally remains solid.
Iran in focus
The traditional safe-haven assets, such as Treasuries, Silver and gold all declined today, and the price of oil also continued to fall in the face of the improving economic outlook, as the odds of a new military conflict in the Middle East declined. President Trump unexpectedly called for the resumption of the talks with Iran, and while the hardliners in the Persian state called for revenge, downplaying the effects of yesterday’s missile attacks, the two sides seem to be steering away from a major conflict.
The government jobs report will likely steal the show tomorrow, and volatility could already spike higher in pre-market trading because of the release. All eyes will be on the non-farm payrolls figure following last month’s blowout reading of 266,000 and this week’s bullish ADP payrolls number. The unemployment rate is expected to be unchanged at 3.5%, while hourly earnings are forecast to rise by 0.3%. As the global economy has been showing signs of life in recent weeks, Treasuries yields could explode higher, should the U.S. labor market continue to show robust growth.
Dow 29000 next?
Technical Corner. Since the major indices all erased last Friday’s dip, it’s no surprise that technicals continue to be bullish across the board, with not a single trend indicator flashing red. The major indices are still well above their rising 200-day moving averages of 8,153 for the Nasdaq, 2,981 for the S&P 500, and 26,817 for the Dow and now just shy of Dow 29000. Despite the late-day pullback, the benchmarks are also north of their steeply rising 50-day moving averages of 3,149 for the S&P 500, 8,682 for the Nasdaq, and 28,024 for the Dow.
Thanks to five consecutive bullish months, Apple’s (AAPL) stock achieved yet another technical milestone, passing the $300 per share level yesterday. Even though the company lost the title of the most valuable public company due to the Initial Public Offering (IPO) of the Saudi oil giant Aramco, it took over Microsoft (MSFT), while crossing $1.3 trillion in total capitalization. The stock hit another record high today, and it’s well above both its moving averages, and while an orderly pullback could happen anytime, Apple is still likely to lead the way higher in 2020. Stay tuned!