In less than two hours on Thursday, we went from hoping the market could retain half of yesterday’s rally to actually adding onto it!
At its worst of the session, the Dow had given back more than half of Wednesday’s 1000-point surge. Just as all hope of a follow-through seemed lost, the late turnaround began to take hold. The index finished 260 points in the green with a rise of 1.14% to 23,138.82. That marked a more than 850-point swing in the upward direction.
The other major indices followed the same trajectory. The S&P ended with a gain of 0.86% to 2488.83, while the NASDAQ rose 0.38% to 6579.49.
The Dec. 26th rally was the first real sign of life for this sickly market all month long. It would have been disheartening for a lion’s share of it to be lopped off in the very next session. The market sentiment has moved from nervous to downright gloomy in the past few weeks, so today’s buy-the-dip mentality after the best post-Christmas Day session in history was just what we needed to keep hope alive for of an end-of-the-year rally.
Unfortunately, we still don’t know what’s happening out there. The bottom may have been reached on Christmas Eve… but there aren’t many investors willing to stick their necks out too far just yet. We’ve been hearing about bottoms for three months now. It could also be a momentary blip higher on the verge of even more downside.
It sure would help if some of the market’s real uncertainties could be cleared up sooner rather than later. A trade deal with China within the 90-day window would be the best medicine right now, and it wouldn’t hurt if this partial government shutdown could be resolved with as little pain as possible.
For now, let’s just see if this market can stay in the green for the final two sessions of 2018 and start the New Year on the right foot.
Today’s Portfolio Highlights:
Momentum Trader: Casual footwear retailer Crocs (CROX) has been showing strength relative to the market. It found support at its 50-day moving average several times since bouncing off its lows in May. Dave decided it was time to add this stock to the portfolio with a 12.5% allocation. In addition, as part of the apparel industry, CROX is in the top 31% of the Zacks Industry Rank. Learn more about this new buy in the full write-up.
Income Investor:“Big money takes time to move, but worries that we were not, in fact, out of the woods looked all-but confirmed by noon Thursday, as major indexes had already given back about half of their rebound gains.
“And then almost out of nowhere, the buyers came in Thursday afternoon, and we rallied sharply into the green on the day. The S&P is now on a winning streak, which has become a rarity in recent weeks, and the “Bottom is in!” crowd seems to have won the moment.
“All of this is a long-winded way to say that stocks whipsawed like crazy this week. I’ve been caught off guard in past months when we’ve made new lows, so I don’t want to jump the gun this time. But the price action we saw this afternoon was positive, and with a cluster of technical and fundamental support lying just below Monday’s lows, I’m cautiously optimistic about our outlook for the rest of the year.” — Ryan McQueeney
Options Trader:“Stocks are considered grossly oversold, especially given the robust economy. The market was due for a bounce. And with so many stocks trading at such tremendous discounts, it’s no wonder we’re seeing large money managers and professionals and pension funds coming in and buying.
“Adding to the feeling that maybe the worst is over were reports that the U.S. and China will meet face-to-face for more trade talks in early January. In the meantime, “intensive” phone calls will continue, according to China’s Commerce Ministry spokesman.
“Trade tensions with China have been one of the biggest forces weighing on stocks. The more it looks like a deal will get done, the better the market will fare.
“But I don’t want to get ahead of myself on trade. Especially given that the deadline isn’t until February 28th. I would imagine there will be lots of good news and not so good news (rhetoric and otherwise) leading up to the deadline. But at the moment, it looks like there’s good reason to be optimistic. At least enough to get much further away from recent lows.” — Kevin Matras
All the Best,
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