The bulls woke up on Wednesday morning and found themselves in a hole after the overseas markets were bleeding red. Futures were uglier than a night out on the Vegas strip but got brighter after a sweet jobs report from ADP which we covered yesterday.
Trading started off slow while the bears held serve for much of the morning but the tide turned shortly before lunch and the bulls were back in business. Tech and Financial stocks were strong which helped the S&P and Nasdaq post earlier gains than the Dow but by the closing bell, all three ended above our short-term targets.
The Dow gained 32 points, or 0.3%, to close at 11,722. The index traded into our target zone of 11,600-11,700 all last week but couldn’t close above 11,600 by the end of 2010. On Monday, the index took out both levels which were a bullish signs as the Dow closed above 11,700 for the first time since August, 2008. Next stop: 12,000.
The S&P 500 added 6 points, or 0.5%, and settled at 1,276. The index hit a high of 1,277 and closed above our 1,275 target. It was also the S&P’s highest close since September, 2008 and clears the way for a run at 1,300.
The Nasdaq was the strongest of the three as it jumped 21 points, or 0.8%, and ended the session at 2,702. We were cheering for a close above 2,700 by the closing bell and we got it.
We mentioned a few months ago as we approached these upper levels that we would need to see the Financial stocks rebound and that is exactly what’s happening. There has been a heavy rotation into the sector over the past week or so and the group has outperformed the rest of the market while providing new momentum for the bulls.
Shares of Bank of America (BAC, $14.50, up $0.26) and JP Morgan (JPM, $44.70, up $0.54), two Dow members we like to follow, showed continued strength and led the charge higher. We are still iffy on Bank of America but JPMorgan looks strong heading into their earnings announcement which is next Friday.
Tech was strong but the two names we really love are already current trades and we talk about them in the Members Area this morning. Both option trades have gotten off to great starts. We have also added a few new names to our Watch List which could become trades any day now. Subscribers, check for the updates.