Bulls Regain Footing Above Key Level

Bull in ring

Stocks rebounded last week as the bulls regained their footing at a key level.

The S&P 500 rose 1.2 percent between Friday, September 7, and Friday, September 14. It was the biggest weekly gain in two months, with more than two-thirds of the companies in the index gaining.

Perhaps more importantly, the bounce occurred at the same 2870 area where the S&P 500 peaked in January before crashing and consolidating through the spring. (Click here for our special report on the key “engulfing candle” reversal pattern.) Has old resistance become support?

S&P 500 with levels and Sept. 11 bullish engulfing candle.

Several positive things occurred last week. The economic data remained strong, with jobless claims falling more than expected to a new 49-year low and inflation reports showing little risk of rising prices. European policymakers have the confidence to take the training wheels of their economy and China looked to resume trade talks with the U.S.

That helped fuel remarkably broad strength across various parts of the market: global stocks and energy companies bounced. Transports broke out to a new all-time high. Software continued to blitz higher. Even long-time laggards homebuilders rose almost 2 percent. Financials were the only major sector to lose ground.

Advanced Micro Devices (AMD) was the biggest gainer in the S&P 500, ripping 20 percent, as investors continued to chase a rally in the once-forsaken chip maker. Discovery (DISCA) was second-best with a 15 percent gain.

Kroger (KR) and NiSource (NI), however led to the downside. KR dropped 14 percent on weak same-store sales, and NI fell 9 percent after one of its natural-gas utilities was linked to fatal explosions near Boston.

The week is relatively quiet in terms of scheduled events, although there’s likely to be more trade drama between Washington and Beijing. Traders may also focus on changes in big stock-market indexes as companies like Facebook (FB) and Alphabet (GOOGL) are shifted from the massive technology sector to a new communications bucket. Stick with Market Insights for more this week.

Today’s items include the New York Federal Reserve’s Empire Manufacturing index and FedEx (FDX) earnings after the closing bell. NAHB’s homebuilder-sentiment index is the main event tomorrow.

Wednesday features housing starts, building permits and crude-oil inventories.

Thursday brings initial jobless claims, the Philadelphia Fed’s activity index and existing home sales. Micron Technology (MU) also reports earnings after the closing bell.

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David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.