Dow breaks through 25,000

About 90 minutes in the trading day yesterday a small flame began to burn in the Dow that quickly grew into a huge bullish fire pushing the index higher and the Dow breaks through 25,000.  At the end of the day, there were new record highs in the QQQ,’ and the IWM and the SPY surged higher as well.

Asian and European markets also posed gain overnight, and the current futures suggest a little bullish follow through at the open with a modest gap up this morning.  After such a strong recovery rally it would not be out of the question to see some profit taking begin at any time so be careful not to chase at the open.  The Bulls could also just as easily ride the momentum wave higher today so stay focused on price action.  Yesterday was a very good lesson that price action is king and predicting is a losing proposition.

On the Calendar

The Thursday brings us a full Economic Calendar but only one possible market-moving report at 8:30 AM Eastern.  According to consensus Jobless Claims expect a reading of 225,000 this week, an increase but continues to show strong labor demand.  After that, we have the Consumer Comfort Index @ 9:45, Quarterly Services @ 10:00, Natural Gas @ 10:30, five bond Announcements, Consumer Credit @ 3:00, Fed Balance Sheet & Money @ 4:30 to end the calendar day.

On the Earnings Calendar, we have 46 companies reporting earnings with SJM before the bell and AVGO after the close.

Action Plan

After the morning gap up the market seemed to stall for about 90 minutes.  The QQQ and SPY started to show a slight weakness, and then the lagging Dow Index began to catch a bid igniting a very strong rally.  After cutting through the resistance at 25,000, there was a skirmish between the Bulls and Bears just above 25k, but in the last 30 minutes of trading, the Bulls gained the upper hand index advanced another 100 points.  The buying was infectious spreading across all of the indexes with the QQQ’s & IWM once again setting new record highs.

If there ever was a good lesson in staying focused on price action and avoid prediction, it was yesterday.  Asian and European markets joined in on the bullish celebration also posting gains overnight.  Consequently, the futures are once again pointing to a gap up open this morning more than 50 points.  And once again I will caution you about chasing the gap and staying focused on price action.  Profit taking could begin at any time so have a plan to protect those tasty profits the market has provided during this fantastic recovery rally.

Trade Wisely,

Doug