The stock market rallied this week. This one, unlike the other rebound attempts, has a decent chance of lasting.
has gained 6% since Friday afternoon, when the index hit its lowest intraday level of the year. The expectation that the Federal Reserve will become more aggressive in its plan to raise interest rates helped boost gains this week. The central bank tries to rein in high inflation by raising short-term rates, which aims to dampen economic demand. But Wednesday’s Fed minutes revealed that the Fed may not implement more rate hikes than currently planned. In fact, the minutes implied that rate hikes could slow at some point, as economic growth has already started to slow.
Gatherings like this were short-lived this year. A rally in late March took the S&P 500 just above the 4600 level. It fell from there, and each subsequent rally took the index back to lower levels.
But there are many reasons10 according to Instinets Chief Market Technician Frank Cappelleri to believe that this latest rally will last.
Reason #1: The S&P 500 had its fourth straight good close. Wednesday marked the fourth consecutive trading day when the index closed above its midpoint for the day, writes Cappelleri. This is much better than the end-of-day selloffs the stock market had seen in recent weeks.
Reason #2: The New York Stock Exchange’s TICK hit its highest level in just over a year on Wednesday. The TICK index shows the number of stocks on the New York Stock Exchange that rose for a short period minus those that fell. The TICK reached 1,822, a level that often leads to more upside.
Reason #3: The S&P 500 is at a level that should give it some support, given the loss of the indices this year. Technical analysts look for support and resistance areas on their charts as they try to determine where the market might go next. Simply put, as long as support holds, further declines are unlikely from here.
Reason #4: The S&P 500 is currently showing a DeMark buy signal. This is a fancy technical indicator which takes into account recent intraday highs and lows of the index. Believe me, this is a good thing.
Reason #5: The S&P 500 is above a key trendline. Basically, this month’s losses imply that the index could easily fall below 3950. It recently broke above that level.
Reason #6: The market is building bullish patterns. The recent jump in the indices, bringing them above key levels, shows that buyers could return to the market and stay there, Cappelleri said.
Reason #7:Fewer equity groups hit new lows. Only nine exchange-traded funds hit new lows this week, down from 24 last week and 96 the previous week.
RSeason 8: High Yield Bond Prices Rise. The
iShares iBoxx $ High Yield Corporate Bond ETF (HYG) gained 1.5% on Wednesday for its biggest gain in more than
two years. This means investors are more confident in corporate credit and less worried about a recession.
Reason #9:The dollar fell from a multi-decade high. The steady rise of the dollar this year has been bad news for equities. The greenback recently fell from its 52-week high, with the dollar a welcome sight.
Reason #10: The S&P 500 is holding up against bad news.
(SNAP) earnings warning initially caused the index to fall, but it has since recovered. This could indicate that the market has already reflected much of the concerns about the economy and earnings.
Write to Jacob Sonenshine at [email protected]