Stock Market Internals Continue to Impress!!

Thursday market recap:   Equity markets logged another impressive performance as most broad market averages gained close to 1%.   Unlike Wednesday, stocks had plenty of support from Oil, rallying 3% to 4% to the highest prices in over 3 months.

Mid afternoon investors gained confidence the market would avoid a late day fade as the 2:00 PM release of the September FED minutes painted a more “dovish” picture toward an initial and future rate hikes than had previously been envisioned.  Again, the Last Hour Indicator was bullish, with stocks closing just off their highs of the day.

Stock Market Internals Continue to Impress

The DJIA and S&P 500 both closed above their 50 day moving averages while NASDAQ and the Russell 2000 are easily within a day’s reach of the same.
Market internals continue to be very constructive as advancing issues led decliners by better than +3 to 1 on NYSE and +2 to 1 on NASDAQ

This is at least the eighth straight day of positive adv/decl stats as the market continues to experience a lot of repair in Oil, Energy, Materials, Metals and any names commodity related that were relentlessly sold in the last few weeks of the Third Quarter.

Let’s take a closer look at where we are in relation to the mid September highs:

Isn’t it ironic that on a day when the FOMC releases the minutes from its mid September meeting, the S&P 500 trades to the exact same level that proved to be major resistance the afternoon of September 17 following their decision to delay an initial interest rate hike.

No doubt the market had a much better “feel” yesterday than it did on September 17, when it gave up 300+ DJIA points and 30 S&P 500 handles in the last 90 minutes of trading.

Stock Market Internals Continue to Impress

The S&P 500, +0.9% at 2013.43 closed it its highest level since August 20th, and regained its 50 day MA for the first time since August 18.  Wednesday’s intraday high of 2016.50 was just a tad shy of the September 17 intraday high of 2020.86.  After posting gains 7 of the last 8 days, the S&P 500 has gained +7% from the September 28 close of 1881.77.   Impressive!!  If you’re looking for an upside target, the 200 day MA is at 2062.

Stock Market Internals Continue to Impress

The DJIA +0.8% at 17,050 has posted gains for 8 consecutive days, while rallying +6.5% from its September 28 close of 16,002.  It’s held the 50 day MA after regaining it 3 days ago and closed above the September 17 intraday high of 16,933.    The 200 day MA is at 17,608.

NASDAQ, +0.4% at 4810.97 continues to be an underperformer as the Biotech stocks struggle to  find near term support and the Internet/Social Media names(sans Twitter) have also seen  profit taking this week.   Note that these were the 2 main drivers of the significant over performance that NASDAQ enjoyed from mid 2014 through the end of Q2 2015.

Still, NASDAQ has rallied 6 of the last 7 days, and gained +6.5% from the late September lows.  It’s within 1 strong day of the 50 day MA at 4841.17.   The 200 day MA is 4917.66.   However, it is still well below the September 17  intraday high of 4960.87, as it was the following Monday that the big correction in the Biotech space began.

The Russell 2000 +0.9% at 1163.94 is within a whisker of its 50 day MA of 1164.80.  Having gained +7.2% from the September 29 close of 1084, it’s still got some work to do after being the biggest loser in Q3, down 12.5%.  The September 17 intraday high is at 1194, and the 200 day MA is at 1218.

How the Stock Market Internals Continue to Impress

The big difference, hands down, from how the market acts right now, and the last time we were at these levels in mid September is that the market internals are undeniably stronger in terms of both adv/decl stats and UVOL/DVOL.  This has been aided by the likelihood that  commodity related sectors very possibly bottomed under the weight of capitulation selling at the end of Q3.

Even the obvious valuation correction going on in the Biotech and Internet/Social Media can be construed as constructive and healthy, longer term.

The Biggest Risk in the immediate term is that earnings season gets into full stride next week.  Watch the Banks closely!!, as all the big names report next week.  Deutsche Bank and Credit Suisse were big losers yesterday to announcements of a major Q3 loss and write down by DB and a pending significant capital raise by Credit Suisse.

US based banks likely don’t have the same concentrated issues, but still have exposure in Europe and emerging markets around the globe.

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