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Wednesday, February 17, 2010

Bullish Stars Align as Financials, Energy Stocks Heat Up

Dow Surge Tuesday On Sluggish Volume
Volume is still lousy, even amid Tuesday’s sharp move higher in stocks. Traders look at strong volume as a way to gauge the conviction behind a market move. So it’s worth noting that despite the robust rise in stocks, volume is still pretty soft keeping with its recent tendencies.
The bulls returned from a long weekend well-rested and ready to buy today, as stocks shot higher right out of the gate. The financial sector helped to pave the path into the black, after British bank Barclays (BCS) said profits nearly doubled in 2009, JPMorgan Chase (JPM) announced plans to buy a joint commodities venture, and Bank of America (BAC) reported "significant gains" in the number of modified mortgages on its books. Elsewhere, a double dose of encouraging economic data added fuel to the bulls' fire, with reports on both manufacturing and U.S. homebuilder confidence showing month-over-month improvements. Furthermore, easing concerns about Greece's mounting debt sparked a rebound for the euro, sending dollar-denominated commodities higher as a result. Against this backdrop, all three major market indexes kicked off the holiday-shortened week on a high note, with the Dow Jones Industrial Average (DJIA) finishing with a triple-digit gain.

The Dow Jones Industrial Average (DJIA – 10,268.81) settled near its session highs today, adding 169.7 points, or 1.7%, by the close. Financial issues BAC, American Express, and JPM joined forces with pharmaceutical concern Merck – which offered up animpressive fourth-quarter report this morning – to lead the 28 advancing blue chips, while Kraft Foods and Pfizer bucked the trend. Thanks to today's triple-digit advance, the Dow toppled its 20-day moving average for the first time since Jan. 20.
However, the blue-chip barometer is still battling its 10-week trendline, which hasn't been defeated on a weekly closing basis in more than four weeks.
The S&P 500 Index (SPX – 1,094.87) also ended near its intraday high, advancing 19 points, or 1.8%, to climb back atop its own 20-day moving average. Nevertheless, like the Dow, the SPX still faces a potential roadblock in the 1,100 neighborhood, which is home to its 10-week trendline.

Not to be outdone, the Nasdaq Composite (COMP – 2,214.19) gained 30.7 points, or 1.4%, to power past its own 20-day moving average for the first time in nearly a month. But, like its peers, the tech-rich COMP is still staring up at its 10-week moving average.

"Earnings have been strong and people are starting to believe the recovery we're seeing in the economy is real," said Angel Mata, managing director of listed equity trading at Stifel Nicolaus Capital Markets in Baltimore.

"There's more of a fear that investors will miss the next move up, as opposed to not being involved and watching the market go down."

The S&P resumed weekly gains last Friday after four consecutive weeks of declines, which were triggered in part by fiscal weakness in Greece and other euro zone countries as well as uncertainty about China's moves to curb bank lending.

Commodities followed, with oil climbed $3.06, or 4.11%, to $77.56 a barrel while gold rose $29.80 to $1,119.30 a troy ounce. Shares of Exxon Mobil (XOM: 66.29, 1.16, 1.78%), Chevron (CVX: 73, 1.72, 2.41%),Halliburton (HLB: undefined, undefined, undefined%) and Schlumberger (SLB: 65.57, 1.27, 1.98%) advanced on the broad energy rally.

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