The Ultimate Buy Signal
April 13, 2018
Since peaking on January 26, the stock market has been on a wild yet contained ride that saw the S&P 500 hit a low on February 8 and then retest and hold that same level on April 2.
That double bottom was the first part of a potential buy signal (see the blue arrows on the chart below). The other part of that signal would come with the index taking out previous high points where rally attempts had fizzled.
Well, that happened yesterday when the S&P closed above 2,662, which means there are no longer any technical hurdles until 2,787. From there, the charts suggest the index will be on its way to retesting its all-time high. For the moment, we are still in a wide trading range in which stocks have bounced around on the most nebulous events. Once these “tempests in teapots” go away, that would be the ultimate buy signal.
Thursday was a great session, although it did temper into the close with the Dow Jones Industrial Average giving back more than 100 points. Market breadth was impressive and the best in weeks as new highs are once again edging out new lows.
The financials were the big winners, powered by regional banks including Zions Bancorporation (ZION), Regions Financial (RF) and Citigroup (C). Industrial names popped, and technology surged without Facebook (FB) as semiconductor names are reigniting.
Earnings Season Kicks Off
Amid that backdrop, earnings season started today on a pretty positive note with three big banks releasing results. Citigroup (C), JPMorgan Chase (JPM) and Wells Fargo (WFC) all beat expectations for both earnings and revenue. Still, I love this table from CB Insights. It shows that the late bout of anxiety into the close yesterday came from the big earnings calender. It’s the most treacherous time for investors and even analysts who have seen cheer fade as reflected on conference calls. Accolades to management – such as “great quarter, guys” and “congratulations on a great quarter” – peaked ten years ago.
I’m pumped and ready for more buy signals and profits because the fundamentals are so strong. I hope you are, too. These are the times we get oppotunities that allow us to beat the market – and the “experts” – big time.