Stocks put in another positive performance and leading the pack were the Energy (XLE +2.52%) and Financial (XLF +2.34%) sectors. Let’s give a hat tip to Crude Oil (USO +2.15%) because its recent rally is providing the grease to keep the wheels spinning in this market. (As long as energy market rally has gas to run, stocks should too, even if a disproportionately large share of them happen to be beaten down and oversold energy companies.)

In economic news today, the CPI less food-and-energy was relatively unchanged (mth/mth @ 0.2% vs. consensus @ 0.2% and prior @ 0.2% and yr/yr @ 2.0% vs. prior @ 1.9%).  The Empire State Manufacturing Survey report indicated a continual contraction for the New York region (actual @ -4.59% vs. consensus @  -7.0% and prior @ -10.74%). On the residential real estate front, the Housing Market Index remains strong (actual @ 61 vs. consensus @ 63 and prior @ 62).

Tomorrow the Federal Reserve will announce its interest rate policy decision which will more than likely indicate a rate hike. What is even more important will be its disposition going forward, i.e. dovish or hawkish. My guess is that it will be data dependent and lean toward the dovish side as it considers existing domestic and global economic conditions.

Performance Summary

*Trends: ST = short-term; MT = Intermediate-term; LT = long-term

Market Condition

So as it stands, we have a quadruple bottom (the market has tested this price level area 4 times this year and advanced). Momentum remains in bearish territory but it is accelerating upward and we are within spitting distance of crossing the SP-500’s 50 and 55 day moving averages. More encouraging is that despite advancing 50 points over the past two days, it is hardly anywhere near being overbought. Overall, it’s not a bad condition to have for a rally.

With that said I am still somewhat skeptical. Over a 3-day timeframe, only 28% of the SP-500 components are up in price on higher volume. In other words, there has not been much of a recovery in terms of breadth or volume dollars. Just be careful as this rally smells like a funky old bear-trap. I could be wrong and, if so, it would not be the first time. Nevertheless I advise caution.

Hillbent on the Market Direction…

Volume Radar Alerts

• Vol % = volume percentage greater than average volume
• SIR = short interest ratio or days to cover