9:00am (EST)
The bulls were facing a make-or-break session on Monday (and last Friday) after the bears broke through several layers of support last week. The losses were historic for a Thanksgiving week and there was panic in the air following last Wednesday’s selloff. We did some late night homework to ready ourselves for Friday’s action, which got off to a good start, and to get a closer look at new support areas and possible new trades. Although the market ended lower that day, we saw some strength and wanted to get positioned for another possible rally and some good news.
There weren’t many investors willing to take on the risk of going long but we knew with the eurozone leaders meeting today, there would be an urgency to set guidelines to leverage the region’s bailout fund.
Rumors were flying over the weekend after word spread the International Monetary Fund (IMF) was preparing to give aid to Italy, but that story was eventually denied. However, France and Germany seem ready to move forward with the proposed expansion of the European Financial Stability Facility (EFSF) which would insure up to 30% of debt offerings to struggling countries. (Side note: Moody’s (MCO, $32.65, up $0.32) tried to step in front of the bulls train by warning that the ongoing situation is “threatening the credit standing of all European sovereigns”).
We were also betting on Black Friday being a Green Payday for retailers. It was the best BF ever according to estimates by the National Retail Federation as a record number of shoppers hunted for sales from Thursday to Sunday. We went to our local Best Buy (BBY, $26.49, up $0.86) to check the lines and it was insane. Judging from the looks of things, Microsoft (MSFT, $24.87, up $0.57) could be a big winner this holiday shopping season. We also expected Cyber Monday to be just as big and early reports are sales were up 15% compared to last year.
As a result, the market recorded its best post-Thanksgiving Monday ever with the major indexes gaining 3%, on average.
The Dow dashed 291 points higher, or 2.6%, to finish at 11,523. We didn’t get the close above 11,600 we were looking for but there wasn’t a dramatic pullback from the high of 11,562. If the bulls can advance today, great, but the index will need to hold 11,400-11,350 on a pullback.
The S&P 500 added 34 points, or 2.9%, to settle at 1,192. We were pleased with the close above 1,175 which is now “short-term” support and the bulls will need to clear the 1,200 level and the 50-day moving average to keep the bears at bay.
The Nasdaq soared 86 points, or 3.5%, to close at 2,527. The bulls easily cleared the 2,500 level and held 2,525 which were impressive feats. A move back above 2,550 and then 2,600 will be keys to a sustained rally.
The S&P 500 Volatility Index (VIX, 32.13, down 2.34) fell 7% and we have mentioned the possibility of the VIX testing the low 20’s by yearend. However, the bulls will need to get under 30 first, while at the same time holding down 36.
Yesterday’s move was a start and futures are pointing towards another positive open this morning. Dow futures are up 30 points to 11,528 while the S&P futures are higher by 5 points to 1,196. The Nasdaq 100 futures are advancing 4 points and are at 2,225. Subscribers, check the Members Area for the current trades updates and stay on your toes for a possible Trade Alert this morning.
