9:15am (EST)
You could almost feel the market’s frustration with Europe and we told you a big move was coming either way once the situation came to a head. Following Monday’s pullback past support, the bulls were faced with a dilemma and looked as though they were either going to throw in the towel or come out fighting as the bottom of the current trading range appeared ready to fall.
We mentioned in our Weekly Wrap the bulls would need a catalyst or some good news to get their mojo back and here were some of our thoughts:
“There are 5 trading sessions left before Christmas is here and the market is closed next Monday. This means there are only 9 days left before the end of 2011. For you historian buffs, the market hasn’t had a losing pre-election year since 1939 so the bulls will be motivated to keep this streak alive. The other indexes have a little work to do but we saw some encouraging signs last week that still have us “bullish”.
We are also keeping a close eye on the Russell 2000 which may have bottomed after testing the 700 level once again. If this index can get back above 750 then it would be bullish. A drop below 700 would only confirm our bearish feeling.” (END)
The Dow soared 337 points, or 2.9%, to finish at 12,103. The blue-chips traded to a high of 12,117 and easily reclaimed the 11,800 and 12,000 resistance levels before running out of gas. These two areas will serve as short-term support again as the bulls’ eye another run back above 12,200. If cleared, there is a chance for a push up to 12,350-12,400 this week.
The S&P 500 jumped 36 points, or 3%, to settle at 1,241. The index went out near its high after getting past 1,225 but fell short of testing 1,250. This area has been a headache but if the market can clear this level then we can expect a test up to 1,275-1,300 over the next few weeks. The 1,200 level will still need to be watched if there is a pullback and 1,225 falls.
The Nasdaq zoomed 81 points, or 3.2%, to end at 2,603. Tech also went out near its high and the best news was the close above 2,600. This should clear the way for a run up to 2,650-2,675 if this level sticks with 2,550 providing short-term support. If the bulls can push 2,700 there could be a rush of cash coming off the sidelines.
The Russell 2000 added 30 points, or 4.2%, to close at 738.22. The index went out exactly on its high for the day and if you look at Sunday’s chart you will see why we are rooting for a close above 750.
The S&P 500 Volatility Index (VIX, 23.22, down 1.70) dropped 7% and traded to a low 22.54. Bingo. We have been harping on the 22.50 area since October.
Of course, yesterday’s rally won’t mean a hill of beans if the bulls are unable to hold these gains and advance past the next wave of resistance.
Futures are up as we head to press and look like this: Dow (+1); S&P 500 (-1); Nasdaq (+1). Subscribers, check the Members Area for the updates.
