Thursday’s Recap: Another great day at the market! All three major indices finished solidly positive. Dow ended the day up 175 points to its highest level in six weeks. Dow has gained nearly 21% since close to hitting a 12-year low on March 9. Nasdaq has now erased all losses for 2009 and is now back in black. AMAZING! Dow, however is still down 9.7% for the year.
Mainly 3 factors contributed to today’s rally. 1) Better than expected earnings and future guidance by retail giant BBY, food processor CAG, and soft drink company DPS – relaying the fact that the consumer spending is still intact, 2) Contrary to yesterday’s disappointing auction, today’s auctioning on long term debt was received with enthusiasm, lifting the fear about the government’s ability to fund its economic stimulus and financial bailout programs, and 3) shorts got squeezed and forced to cover some of their positions. Stocks have been aggressively shorted during the market decline and the short interest had risen 11% by mid March. Enormous amount of sideline money is slowly venturing to get back in to the buying mode.
Economic data (GDP and unemployment) were not great, but the numbers came within forecast. Hence, did not have major impact on markets. Tim Geithner appeared very confident and handled questions with ease in his testimony to the house finance committee. Markets and for that matter the congress, are becoming comfortable with our new treasury secretary.
When the closing bell rang, the Dow had gained 175 or 2.3% for the day and it closed at 7925, its highest close since February 12. The S&P500 index rose 19 points or 2.3%, to 833, and the Nasdaq rose 58 points or 3.8%, to 1587. Gold prices also rose modestly. Oil reached a new high for the year, settling up $1.58 at $54.34 a barrel.
Today’s gains were widespread as all 10 major sectors in the S&P 500 closed the session higher. Contrary to recent form, the gains came without leadership from the financial sector. The dollar is stabilizing and it rose marginally against other major currencies. This brings to the comments I made last Thursday, when dollar took a dive after fed announced a trillion dollar infusion to bolster economy. Here is what I said:
Is Dollar Worry Over Blown? – ……. In my opinion, the dollar related reaction to fed decision is a little over done. US economy is still the strongest economy in the world despite all our problems. Dollar is still the dominant currency. People who are squabbling over greenback, should just look back a little. Just 6 months ago, EUR/USD pair was trading at over 1.60. Now, when it jumped from 1.30 to 1.35 or so, all hell breaks loose! ……………………… So, relax folks. A slight decline in dollar is not the end of the world as the dooms day pundits like Larry Kudlow and his friends on CNBC rant about. The dollar is already stabilizing against the Euro and Yen as I write this blog around mid night.
That was last Thursday …. Friends, how true that statement turned out to be. … PATIENCE …. Patience is what we need to navigate this market. Do your home work and do not be swayed by hype!!
TaurusTrader swing portfolio had a superb day. MELI was closed out for 13.5% profit in two days. All positions, except BAC advanced. TCK. MBT and WNR are very close to hitting their profit target.
It was not a bad day for day trading. There were opportunities to trade for 3 to 5% profit with TNA. Rest of the picks did not pan out well. As discussed before, I use 10-min chart to determine entry and exit points.
Picks for Friday, March 27: President Obama and Treasury Secretary Geithner will be meeting with banking industry CEOs to discuss on banking crisis, bailout money, toxic assets, and regulations, etc. Any post meeting snippets from participants may have some impact on financial sector stocks. Friday’s economic data releases include, Personal Income ( Expected: -0.2%), Personal Spending (Expected: +0.3%), and U Mich Sentiment Index (Expected: 57).
Even though I’m very tempted, I do not want to add any new position to swing portfolio. The current portfolio of 11 stocks is well diversified, and a few positions are very close to hitting profit target. So, I’ll wait till next Monday or Tuesday to add new positions.
For day trading, I’ll focus on financial, technology, energy, ag and commodity sectors for trading opportunities. Some of the specific stocks that I would be following are – FAS, TNA, DUG, MOS, and JOYG.
If there are questions or comments, please do post.
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Happy trading ….