U.S. stocks have put together an impressive couple of days, with the S&P 500 rallying over 3% from this week’s lows. While the action has been solid, Thursday marked the turning point. In the stock market today, we saw a bevy of buyers, with major U.S. indices hitting their highest levels in more than a month.
We saw the SPDR S&P 500 ETF (NYSEARCA:SPY) jump 1.25%, the SPDR Dow Jones Industrial Average (NYSEARCA:DIA) climb 1.4% and the PowerShares QQQ ETF (NASDAQ:QQQ) rally 1.83%.
More importantly, readers of this Stock Market Today column will likely recall the “trading range” we’ve referenced multiple times over the past few weeks. Finally, the market is breaking out of that range and starting to move higher. Let’s take a look.
Stock Market Breakout
Above is a chart of the S&P 500 (SPX), but the SPY, DIA and QQQ all have a very similar setup. You can try mapping the same pattern on these indices and ETFs if you’d like.
In any regard, the breakout is very notable. Over the past month, the 2,940 level has been range resistance on the SPX, while 2,830 has been support. Other considerations included uptrend support (blue line) and the 50-day moving average acting as resistance.
Despite the frustrating and choppy nature of the market last month, it was a pretty simple layout — and one that InvestorPlace readers knew well.
Moving forward, bulls need to see the 50-day moving average and 2,940 hold as support. So long as stocks are above this mark, 3,000 is on the table. Above that opens up the door to 3,020, with the all-time highs near 3,028 just above.
So, is that it, are we in the all-clear now that the SPX and other indices have broken out?
Not so fast.
Worries Moving Forward
While the breakout is important and puts the bulls in control of the market, there are still a few things to take note of. First, the U.S.-China trade war remains a very potent headline threat. Any negative developments on this front — which can be as simple as a feisty tweet from the Tariff Man — and investors may find stocks under pressure once more.
Further, while the 10-2 year Treasury spread is no longer negative, it’s only at 0.04%. Another inversion could fire up the recession calls once more. Although, anyone only seems to care when the markets are under pressure…go figure.
Finally, and this is more of a personal observation, but it’s noteworthy to me that the relative strength leaders are, well, no longer leading.
Stocks like Starbucks (NASDAQ:SBUX), Tyson Foods (NYSE:TSN), Roku (NASDAQ:ROKU), Shopify (NASDAQ:SHOP) and a list of others not only lagged the market on Thursday, but were actually negative on the day.
While some stocks have individual explanations, their underperformance raises an eyebrow. It doesn’t mean the rally can’t continue. But it’s healthiest when the relative strength leaders hold up during market turbulence, then lead equities higher once the clouds part.
That’s not happening this time around, and while “rotation” is one possible explanation, I’m watching this group.
Movers in the Stock Market Today
MongoDB (NASDAQ:MDB) fell more than 5% despite beating on earnings and revenue expectations, and providing upside guidance.
Twitter (NYSE:TWTR) put together an impressive breakout, rallying more than 4% to new 52-week highs. Can it get above $47 now?
Vital support held for BlackBerry (NYSE:BB) last month and now shares are up 5.35% on Thursday after it was announced that the company would strengthen its relationship with Jaguar Land Rover. It includes BlackBerry’s artificial intelligence/machine learning and cybersecurity for connected and autonomous vehicles.
BlackBerry, MongoDB and Twitter were three of the five “Top Stock Trades” on InvestorPlace. Here’s how to trade them now.
Cloudera (NYSE:CLDR) failed to close on session highs, but exploded higher by more than 15% after better-than-expected earnings.
Shares of Slack (NYSE:WORK) closed lower by 3.2% despite beating on earnings and revenue. However, it’s far better than the lows of the day, where Slack fell more than 16% and tested its initial public offering price of $26 before recovering most of the losses.
After closing at around $200 and reporting earnings after the close on Wednesday, Palo Alto Networks (NASDAQ:PANW) plunged to an after-hours low of $180 before rebounding to a high of $220. Talk about volatile! Shares ended the day higher by 5.8% at $212.05 on Thursday.
Last but not least, shares of National Oilwell Varco (NYSE:NOV) jumped 6.3% to three-month highs on Thursday. The jump comes after the stock received an upgrade to “buy” from “hold” at Jefferies. The analyst also lifted their price target to $25 from $23, implying almost 14% upside despite Thursday’s big move.
