SPY Pushing Hard at Near-Term Resistance

Wednesday stock market recap:  Equity markets showed great resilience Wednesday.

Only 2 hours into trading major market averages had already erased early gains of 1%+ and were sitting with fractional losses on the day.  It looked very much like stocks had run into the same brick wall of resistance that halted another 6 day rally just 3 weeks ago.

Stocks had been rallying almost in lockstep with oil since early last week and with crude pushing through the $50 level it felt like the resistance levels from mid September would be an easy hurdle for a market that’s just been recharged 5 trading days into a new Quarter.

It wasn’t as easy as it looked.  The Inventory reports for Crude and Distillates turned Oil on a dime at 10:30 AM, and stocks followed, giving up all their gains during the next hour.

SPY Pushing Hard at Near-Term Resistance

Here’s where the market showed much more grit and determination than during nearly every failed intraday rally the last 2 months.  

Market averages going negative, an hour after sporting 1% gains brought out buyers rather than sellers, as stocks showed they could rally independently from Oil, which struggled to hold the $50 level.  Stocks withstood 2 more waves of selling in the afternoon before rallying sharply in the last hour of trading.  Market averages finished with impressive gains of +.75% to 1½%

SPY Pushing Hard at Near-Term Resistance

SPY Pushing Hard at Near-Term Resistance

Market Internals were the exclamation point on the rally! as advancing issues led decliners by 3 to 1 on both the NYSE and NASDAQ.

This is at least the 7th straight day that the adv/decline stats have been positive, a stark contrast to the dozens of times this summer market breadth was flat to negative on days the averages showed gains.

Additionally, small caps were standout performers, after a miserable Third Quarter, highlighted by the 12.5% decline of the Russell 2000.  It may take a week or two to sort out if this is a “reversion to the mean” trade, or the first sign of a relative value trend reversal.

SPY Pushing Hard at Near-Term Resistance

Keep in mind that we’re only a handful of company reports into what most expect to be a challenging Q3 earnings season.  Concern on prospects for domestic and global growth are rising rather than receding.

There is no doubt The Stock Market still carries the mantle as the great discounting mechanism of all things current, and/or just about to be so, we’ll look to it for hints on how much concern to attach to the upcoming earnings season and how much to worry about the economy into next year.

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