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Stocks Soar Despite Dismal Data
The reason for the big rally? Maybe traders just figured it can't get any worse.

October 28, 2008
By Paul Shread: More stories by this author:

http://www.internetnews.com/bus-news/article.php/3781261

The lowest consumer confidence reading in the 41-year history of the Conference Board wasn't enough to hold back buyers on Tuesday, who sent stocks to their second huge gain in a little more than two weeks.

The Dow's 10.9% gain was its sixth best-day ever — with number five the 11.1% gain that came on October 13. The top four single-day gains all occurred during the Great Depression.

A strong overseas rally, good news for Boeing (NYSE: BA) and GM (NYSE: GM) and expectations for a half-point rate cut from the Federal Reserve on Wednesday were cited as reasons for the rally, but it's possible that the consumer confidence reading of 38 was so bad that traders figured it can't get much worse. The previous record — 43.2 — was set at the December 1974 stock market low.

With the Nasdaq up 9.5% on the day, it was hard to find a tech stock that didn't post a big gain.

Microsoft (NASDAQ: MSFT) gained 9% on a look at Windows 7 and other products.

On the Nasdaq's most active list, Nvidia's (NASDAQ: NVDA) 15% gain and Comcast's (NASDAQ: CMCSA) 24% surge led the way. Comcast benefited from positive comments from Credit Suisse a day ahead of its quarterly earnings report.

AMD (NYSE: AMD) slipped after selling its DTV business to Broadcom (NASDAQ: BRCM) for less than expected.

SAP (NYSE: SAP) managed a 6% gain despite a tepid outlook.

The Nasdaq soared 143 to 1649, the S&P gained 91 to 940, and the Dow soared 889 to 9065. Volume rose to 7.23 billion shares on the NYSE, and 2.85 billion on the Nasdaq. Advancers led by a 27-7 margin on the NYSE, and 20-8 on the Nasdaq. Upside volume was 95% on the NYSE, and 87% on the Nasdaq. New highs-new lows were 3-668 on the NYSE, and 1-622 on the Nasdaq.

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Technical Analysis: 'Tis the Season
The most positive part of the year for stocks arrives right on schedule.

http://www.internetnews.com/bus-news/article.php/3781266

October 28, 2008
By Paul Shread: More stories by this author:

As we noted last week, the last Monday in October has often marked the end of the weakest half of the year for stocks, but we sure didn't expect it to be announced with an exclamation point.

And today, a MACD buy signal on the Dow confirmed the arrival of the best six months of the year for the market, per the work of Sy Harding.

Of course, the big question is whether it's really going to be this easy, and the days and weeks ahead will answer that question.

Still, the seasonality trade has been one of the more dependable ones since 1950. In the last 10 years, for example, the Dow has returned just 700 points, while buying on November 1 and selling on May 1 during that time has returned about 5,000 Dow points. It remains to be seen whether the seasonal trade remains the pattern in decades to come, but for now, there appears to be more support for stocks during that time of year.

For the trade to work this year, the indexes will have to break out of the large trading ranges they've built over the last two weeks. The upper end of those ranges is at 9794 on the Dow, 1044 on the S&P and 1896 on the Nasdaq.

The Dow (first chart below) has first resistance at 9387, and support is 8900, 8500-8700 and 8200.

The S&P (second chart) has first resistance at 985-1003, and support is 922, 915 (and falling), 894-900, 865-875 and 850.

The Nasdaq (third chart) faces resistance at 1670-1700 and 1770-1782, and support is 1584, 1574, 1565 and 1542.

Lastly, we'll once again attempt to pick stocks out of the Dow for the next six months, based largely on low valuation. This time we'll add screens for profitability, free cash generation and balance sheet strength in deference to the credit crisis, leaving us with just four picks: Boeing (NYSE: BA), HP (NYSE: HPQ), United Technologies (NYSE: UTX) and Exxon Mobil (NYSE: XOM). We'll check back on them in the spring to see how they've fared.