Banking stress test results were announced for release in May, something the financial sector has braced itself for, but also ignored to the greater degree, in trade on Thursday. The financial sector found bids in Wall Street trade, and helped the technology sector ride out earlier negative sentiment. This allowed the S&P to finish another day riding high going into the close, and set up another Asian session that has the chance to push forward and move the Nikkei up to possibly test 9000 again.
Two positive Wall Street closes have allowed resistance areas to be tested on the global equity markets, but have been negated by the S&P’s cash market to easily follow through on positive global sentiment in early Wall Street trade. It seems as though the NYMEX oil markets have to close at 14:30 EDT before momentum comes into U.S. stocks, and by default into Usd selling. All of the time that stocks fail to build strongly intra-day sellers of the greenback are going to be challenged in being able to get the dollar index down to test support at 84.00.
The S&P moved from -0.6% to plus 1.7% on Thursday in a period of trade that lacked volume but had momentum. A major price area was tested and held at 860, and leads the way for risk tolerance to now move speculative interest into the short side of the Japanese yen, into long oil trades, and possibly into the buying of aussie, cable, and euro.
The moves on Thursday took the S&P 28% higher than the 12 month lows, mainly on the back of the efforts put forth to re-value mark-to-market accounting, U.S. stimulus aid, and time and patience from investors looking to now build portfolios who are prepared to get on long equities in very specific areas. The volume is still light, but the volatility index is reducing its intensity and allowing the markets to move higher and hold at the moment.
Once mutual funds release the tidal wave of cash on deposit, which they will have to do in numbers at some stage from now until their year-end in October, the 1250 area on the S&P may not seem as far away as it does at present. Whether these are bear market rallies or the beginning of a new bull run is not of importance; neither will reveal itself until the main movers are already in place. By then all that is left is for the herd to stampede.
The smart money looks to already be positioning, and will need the herd to get moving just in time for them to sell their first leg of profit to. There is no bell to signal bulls or bears have the day, just sentiment and a knowledge that major support areas getting taken out on light volume equate to one thing; distribution of short positions ahead of the next leg up. If the bottom has already been put in, something that nobody actually knows, it could signal a move out of the major forex pair's 4 hour channels, and into a trending phase of market activity that gets the Federal Reserve what they want; a devalued Usd.
Volume levels were light but there was no reason it seemed to stand in the way of the long momentum that came from Hewlet Packard’s earnings, something that helped the Nasdaq move higher. A linear regression channel is acting as support at 830 on the S&P, and was holding as resistance at 860, a price area that most trade desks would now be happy to hold at so that a move to 920 could happen.
On Thursday afternoon the NYSE posted gains that averaged 1.5%. The DOW was on 8125 after a gain of 95 points (1.3%) while the S&P traded at 865, higher by 1.5%, and the technology-heavy NASDAQ traded at the 1670 area, a 60 point move in two days, after moving up by over 40 points (2.7%).
The Dax 4609 (+1.3%), FTSE 4052 (2.1%), and Cac 40 3038 (1.7%) all gained in a synchronized move higher in European trade, and never looked back, even in the face of some early U.S. selling pressure.