It was bound to happen, and in many ways, you could feel it coming yesterday – a day that starts strong and finishes even stronger:

• S&P 500 +2.76%: The highest close since June 9 and the first close above the 50-day moving average since April 20
• Russell 2000 +3.50%: The best session in eighteen months
• NASDAQ Composite +3.13%
• Dow Jones Industrial (DJIA) +2.43%
• West Texas Intermediate (WTI) +1.33%
• Bitcoin (BTC) +4.62%
• U.S. Dollar (USDXY) -0.64%

Market Breadth Buy Signal

Volume was better than it’s been lately, and advancers clearly outpaced decliners; while there were few new 52-week highs, there was a sharp decline in 52-week lows, which is important as well.

The more important part of the market breadth complex is up volume to down on the New York Stock Exchange (NYSE), which was >85% for the second time in three sessions. And in the past, that has been a mark of a market bottom, resulting in significant gains over the next 12 months.

Market Breadth	NYSE	NASDAQ
Advancers	2,712	3,580
Decliners	546	1,064
New Highs	14	37
New Lows	48	94
Up Volume	3.69 billion	3.82 billion
Down Volume	385.73 million	1.51 billion

Heat Map

All eleven sectors were higher, but there was a noticeable shift back to value, which lost its mojo to defensive stocks several months ago.

There were very few red spots with the mega-cap moving with enough vigor to move the broad market needle in a very convincing manner.

Yesterday was all about piercing the 50-day moving average. That’s what happened with six S&P 500 sectors. It’s clear that the downslope has been very powerful, so this doesn’t automatically point to an instance reversal. However, it does open up the spigot for short-term buying – so maybe for a while, we can party like it’s our birthday!

Mike Zaccardi

Technical View

I featured the S&P 500 yesterday, and we have to go back again today. First, the index closed above its 50-day moving average in convincing fashion and in the process, it also pierced a pivotal point that has been resistance and support. The next test for the S&P is a move to fill the gap (blue circle) where it might turn lower, which is fine as long as 3,900 holds. From there, we see no resistance up to 4,200. 

The U.S. Dollar (USDXY) has been the Secret Weapon. Although it gets no press, the fact that the USDXY is failing to break 108 has been huge and the subsequent three days pullback, the biggest since March 2020, has added oomph to the rebound attempt.

Portfolio Approach

We are adding a new position in  Real Estate this morning in our Hotline Model Portfolio. If you are not a current subscriber to our premium Hotline service, email Info@wstreet.com to join today. 

Today’s Session

It’s been a slow morning, as investors pinch themselves and dare to hope momentum to the upside could be building.

More demand damage in housing is considered good news, as the Fed needs to curb the enthusiasm in the housing market.

Keep an eye on ten-year bond yield and the action in the NASDAQ 100 (NDX).  Very intriguing.  This could be a big day.

NDX filled a huge gap, and the next upside test is 13,000.

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