Thread --from briefing.com---
To quote Howard Cosell, "It's over. It's all over."
Greenspan KOd a tiring bear market when he surprised many traders with a 50 basis point intermeeting rate cut... The move sent an already bullish market soaring higher... Nasdaq closed up 156 points, or 8%.
Skeptics may point to slippage at the close, uninspiring breadth numbers, failure of sector to sustain gains after last surprise rate cut resulted in similarly bullish session, and/or fact that Nasdaq couldn't hold above its 50-day moving average, as signs that Wednesday's move was just another head fake in what remains a bear market.
Rubbish!
A little profit-taking ahead of IBM's report was to be expected; breadth always lags at turning points; Fed has cut rates by another 150 basis points since 1/3, and we're much closer to the point of an earnings turnaround - so the likelihood of the sector/market collapsing like it did in Feb-Mar is very remote; and given how far the Nasdaq had rallied over past couple of weeks (+28%), it comes as no surprise that resistance in the area of the 50-day moving average and the 38% retracement level held on first try.
Stocks are behaving very positively despite soft Q1 earnings... We've said it before, we'll say it again - one clear sign of a bottom is when stocks rally on bad news.
Several companies have begun to suggest that demand is improving, suggesting that earnings will trough in Q2, Q3 at the latest... Stocks always rally in anticipation of improved fundamentals... Waiting for earnings to actually turn positive means missing out on at least 60% of the move.
Fed (finally) bringing real rates down... Low real rates needed to stimulate sagging business investment... Just one more reason it doesn't pay - over the intermediate- to long-term - to fight the Fed.
Institutional investor are very uncomfortable sitting on all that cash while the markets move sharply higher... As we saw yesterday (with the big jump in volume) money will begin to flow freely back into stocks for fear of missing out on the next bull move.
Will we go straight higher from here? No. But as we predicted when the week began, the market has transitioned from a sell the rallies to buy the dips mentality... So be ready to buy some more when the market pauses to catch its breath - it won't wait long before resuming its advance.
IBM, AAPL, SEBL, NEWP, AMD and EXTR all up in response to after close earnings news... Please see our Short Stories and/or Earnings Calendar for comprehensive earnings coverage.
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