Wednesday recap: Both the Russell 2000 +0.8% at 1275.35 and the NYSE composite index +0.6% at 11,171 made fresh all-time closing highs Wednesday, while higher cap major market averages rallied through stubborn near term resistance.
April 15, 2015: Markets opened higher again on Wednesday and followed the energy sector higher as crude oil gained nearly 6% on a lower than expected build to U.S. inventories. The afternoon release…
Stock market euphoria is not making everyone happy. Day traders are frustrated with gap and sideways action. Swing traders need to be patient. Investors are in a happy place.
DJIA +0.4% at 18,112, S&P500 +0.5% at 2106 and NASDAQ +0.7% at 5011 have been toying with “round number resistance” for a couple weeks, and are now all within 1% of eclipsing their prior closing highs. A well-thought trading plan will position you to trade this price action with caution.
The NYSE Composite Index was clearly the star of the day!! The NYA has been forming a near perfect ascending triangle since at least the October 2014 lows, with no less than 6 to 8 attempts to break through the 11,150 level.
This could prove to be a very powerful breakout if it holds. The NYA is a great multidimensional index of small cap, to big cap, bluest of the blue chips that even includes Foreign Companies with global reach in the form of ADRs listed on the NYSE. Keep in mind there are no foreign domiciled companies in the S&P 500.
The chart below is a weekly going back to early 2013 and highlights how consistently the NYA has rallied off its 50 week MA and the pressure that’s been building this year against the resistance of prior highs. Watch this closely the next few weeks to see how convincingly we hold the breakout to new highs.
Oil, again helped fuel the market’s rally as the commodity broke through near term resistance and doubled its midday gains in the last hour of trading. Oil has rallied 12% in the last 5 days, with the Oil Service Stocks seeing the most investor attention.
Stock Market Euphoria and the Crude Oil Trade
The catalyst for Oil extending its rally late in the day Wednesday came from comments by Iranian Oil Minister Bijan Zanganeh saying OPEC should offer support to members by cutting oil production by five percent. While this is unlikely to happen, it does reinforce how “fixated” the market is on the direction of the price of Oil.
I discuss the crude oil trade in more detail here at Benzinga.
Ignore the Economist behind the Curtain!!
The market has consistently rallied in response to rising oil prices the last 2 to 3 months. Oil is starting the day 1% lower, a well-deserved breather after the 12% rally since the middle of last week. Rising oil prices are most likely to be in play.
It’s not surprising that stocks are set to open a bit weaker, despite yesterday’s breakouts. Momentum has not been a trademark theme of the market in 2015, as investors have sold resistance and bought support very consistently this year.
Regardless, it feels like the path of least resistance in the near term is higher.
Tim Anderson Managing Director TJM Investments, LLC
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