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Stocks Soar After Impressive Reversal

Stocks closed sharply higher yesterday in an exciting session.

After opening lower and quickly filling in those gaps left on the charts in both the Dow and the S&P, stocks almost immediately sprang to life as a wave of new buying came in. I too was part of that buying and it was great to see the market turn from red to green in such a decisive manner.

You'll remember the other day we had talked about the gap left on the S&P chart from 10/30 at 2,685.43, and the gap left on the Dow chart at 24,906.68. And how those gaps typically act as magnets, preventing the market from getting too far ahead of itself before it has to backtrack and fill those in. Because of this, plenty of technicians are reluctant to build new positions until those gaps are closed. But once they are, stocks typically take off.

Well yesterday, in picture perfect fashion, stocks did just that ‐ filling in those gaps and then surging higher right after. And the increase in volume bodes well for even more buying to come.

In other news, yesterday's Weekly Jobless Claims inched up 2,000 to 216,000, while the 4-week average gained 1,500 to 212,500. But both of these numbers remain near their best (lowest) levels in 45 years.

Retail Sales gained 0.8% m/m vs. 0.5% expected. Less autos it was up 0.7%.

The Empire State Manufacturing Survey jumped to 23.3, up from last month's 21.1 and views for 20.0. Analysts noted that 'manufacturing has been a leading sector for the economy and looks to end 2018 on a clearly positive note.'

And Business Inventories rose 0.3% as expected. But sales rose an even bigger 0.4%, showing that inventories have 'further to climb.' This is even more clearly illustrated when looking at the y/y numbers which show inventories up 4.4% while sales are up 6.6%.

More great news for the economy. And the market.

Later today we'll get Industrial Production, and the Kansas City Fed Manufacturing Index.

And hopefully a continuation of the powerful rally that began yesterday.


Kevin Matras

Executive Vice President, Zacks Investment Research


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