The bulls made another step towards setting new highs for the year as the momentum from Wednesday’s huge rally continued. The market made a nice advance at the open and was steady all day as the indexes went out near their highs.
The bulls were led by a couple of “unusual suspects” as the financial sector and the home builders rallied. The financial stocks have been dead in the water for quite some time but have shown some signs of life this week. The banks got another bump yesterday after the European Central Bank decided to extend a liquidity safety net for shaky lenders, but it is so hard to trust the sector right now.
The home builders popped after a better-than-expected pending home sales report as KB Home (KBH, $12.41, up $0.53) jumped 4.5% while Toll Brothers (TOL, $18.87, up $0.41) added 2.2%.
The Retail sector continues to rock as Abercrombie & Fitch (ANF, $56.02, up $5.58) surged 11% after reporting same-store sales zoomed 22% for November while the knuckleheads were looking for an increase of over 6%. The company has been a mess in the past as inventory issues and other missteps hammered the shares to a 52-week low of $29.88 back in January. We waited until May to take a stab on an option trade and our subscribers made 86% on put options in 3 days.
Shares made a high of $50 in April but fell back down to $35 on our watch as we suggested put options when shares broke support at $40.
Fast forward to today.
We have followed the company for over a decade and we knew when shares were approaching $50 there would be a major battle at resistance. The chart has been an easy read but we just missed the breakout because the momentum was telling us the bears were going to have a hard time holding this one back after $50 was touched on Black Friday.
Abercrombie is the subject of a leveraged buyout and the company appears to have righted the ship. The chart is showing a possible run to $70.
As far as the market, the Dow added another triple-digit win as the index gained 106 points, or 1%, to finish at 11,362. We are looking for a break above 11,400 while 11,200 and 11,000 provide support.
The S&P 500, however, managed to close right in our target zone after adding 15 points, or 1.3%, to close at 1,221. A break above 1,225 could get the index to 1,250 with 1,200 and 1,175-1,170 serving as backup.
The Nasdaq chipped in with a 30 point contribution, or 1.2%, and settled at 2,579. The bulls can taste 2,600-2,700 and 3,000 will be in sight if they get over this mountain by yearend. Support is strong at 2,500 and then 2,450.
Futures were pointing towards a lower open when we hit the hay last night but had improved and were positive heading into this morning’s unemployment numbers. That all changed when the market found out that the economy only added 39,000 jobs while the unemployment rate rose to 9.8%. Dow futures were up 20 but changed on a dime and dropped 70 points. The good news is that they haven’t worsened.
As we head to press Dow futures are down 50 points; S&P futures are lower by 6; the Nasdaq 100 futures are off by 11 points.
We’ve had a busy week and this morning will be no different. We felt a little uneasy about this morning’s numbers which is why we took some profits yesterday. However, we still think the bulls can push through this report but today will be challenging.
Subscribers, check the Members Area for the updates, and also stay on the lookout for Trade Alerts if we want you to take any action this morning.