Sell Off Overdone, Strong Buying Fuels Rally

Sell Off Overdone, Strong Buying Fuels Rally

Sell Off Overdone, Strong Buying Fuels Rally

$DIA, $SPY, $QQQ, $RUTX, $VXX

Thursday, US stocks spiked on oversold technicals giving the NAS Comp its biggest daily percentage gainer since March, as Microsoft’s (NASDAQ:MSFT) upbeat earnings fueled strong buying in tech names and investors bought up oversold shares.

Traders said investors bargain-hunted Thursday after the market’s fall Wednesday, and the strong buying drove the the DJIA and S&P 500 back into the Green for the year.

The market is not seeing heavy volume in up days suggesting the recent selling might be close to being over.

The latest round of upbeat earnings results came from a wide range of companies and offered relief after the earnings season began on a soft note and then geared lower on sluggish outlooks from manufacturers and chipmakers.

That fueled analysts worries over the impact of tariffs and China’s corporate profits slowdown, as well as concerns ranging from rising costs, bond yields, Italy’s budget struggles and upcoming US midterm elections.

The sell-off wrung out the leveraged excesses making stocks cheaper fueling strong buying.

The S&P’s valuation fell to a 2.5 year low of 15.3X profit estimates for the next 12 months from 15.8, according to the data.

Results from S&P 500 companies have driven up Q-3 profit growth estimates to 23.6%  from 21.8% in the last 10 days. But some forecasts have pushed down Q-4 growth estimates to 19.4% from 19.9% the data shows.

Notably, the market did not heed to some warnings from companies Thursday like it has recently.

Thursday, the major US stock market indexes finished at: DJIA +401.13 at 24984.55, NAS Comp +209.93 at 7318.52, S&P 500 +49.47 at 2705.71

Volume: Trade on the NYSE came in at 1.1-B/shares exchanged.

Advancers outnumbered decliners on the NYSE by a 2.73-to-1 ratio, and on the NAS, a 2.91-to-1 ratio favored advancers.

The S&P 500 posted 1 new 52-wk high and 36 new lows, and the NAS Comp recorded 13 new highs and 202 new lows.

  • NAS Comp +6.0% YTD
  • S&P 500 +1.2% YTD
  • DJIA +1.1% YTD
  • Russell 2000 -2.3% YTD

HeffX-LTN’s US Major Stock Market Indexes Technical Analysis

Date Symbol Price Technical Analysis Support Resistance
25 October 2018 QQQ 171.06 Bearish (-0.29) 169.65 173.57
25 October 2018 DIA 249.85 Bearish (-0.20) 245.48 250.99
25 October 2018 SPY 270.57 Neutral (-0.19) 269.15 279.35

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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