Stocks rally on tax and healthcare reform optimism
by, 04-21-2017 at 01:11 AM (276 Views)
Stocks opened higher on Thursday morning and continued to rise most of the day, except for a late minor dip near the close. The Dow gained 174-points, off the 200+ point highs of the day. The Nasdaq, small caps, and the Transports led the way on the upside, and those are the leaders that the bulls would want to see outperforming. The Nasdaq actually made a new closing high.
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A new wave of healthcare reform rumors were being tossed around again and adding to this week's tax reform optimism, stocks had a reason to perk up again. There was some selling into the close, probably because we know things can change overnight.
The situation in North Korea is not over so there is still a tentativeness hanging over the market, but no new development other than tough talk. Add that to the tax reform and healthcare talk, plus some solid earnings, and the bears stayed away for at day.
Visa reported earnings after the close on Thursday and like American Express, surprised on the upside, so it sounds like the consumers are spending. Maybe they aren't spending cash, but they're buying.
We head into another weekend, and investors have been reluctant to buy before the weekend in recent weeks. This weekend there are elections in France that could impact the markets on Monday. The bullish action on Thursday would typically bring in more buyers today, but the uncertainty heading into the weekend, given that election and the situation in North Korean, could hold off stocks on the day. If stocks do rally, we may be seeing the turn from the recent pullback.
The SPY (S&P 500 / C-fund) rallied up near the neckline of that inverted head and shoulders pattern we've pointed out a few times. The neckline held and that could be some tough resistance to get above, but if it does break above the upside H&S target would be in new high territory. The 50-day EMA has stubbornly held this whole time.
The DWCPF (S-fund) broke above it descending resistance. This could be also considered an inverted head and shoulders pattern, but it's really a little too sloped. Still, we saw a break of the downtrend and overhead resistance gets a little weaker from here.
The Dow Transportation Index was up strongly but hit that wall of resistance where the descending trend line met the 50-day EMA. It looks like crucial area for the Transports.
The EFA (I-fund) gapped up continuing to bounce off the 50-day EMA, but still below the rising trading channel.
The High Yield Corporate Bond Fund was able to climb back out of that bull flag after Wednesday failed breakout. For now, this looks good and I'd be surprised if it doesn't test the March high in the next couple of days.
The AGG (Bonds / F-fund) dipped on the rally in stocks and so far filling that gap seems like it was the upside target. There is some decent support in the 109.10 - 109.25 area that will be a good test for the bond market.
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