Stocks barreled higher Monday, as the S&P 500 retook its 50-day moving average line with gusto.
The Nasdaq rose 1.2%, while the S&P 500 and the Dow Jones industrial average each added 1%. The Philadelphia semiconductor index led, climbing 1.6%. Volume in the stock market today was higher on the Nasdaq but lower on the NYSE.
Monday’s bullish action left investors with four thing to watch for in Tuesday’s market.
— No. 1, the 50-day moving averages: Although the S&P 500 and Dow reclaimed their 50-day lines, the Nasdaq remained stuck under its own 50-day average. A quiet struggle surrounds the these key lines. Bulls would like to see the Nasdaq join the S&P 500 above the line.
— No. 2, the put-call volume ratio: On Thursday the ratio closed at 1.07 and on Friday it closed at 1.15. Levels of fear this high often mark short-term market lows. Monday’s action, following those readings on the put-call ratio, suggests the lows may be in. However, the ratio is a secondary indicator. Sometimes, it sends false signals.
— No. 3, new highs: The Nasdaq hasn’t scored many new highs recently, and the NYSE has lost some of its momentum in new highs. Bulls would like to see new highs step on both exchanges.
— No. 4, economic news: Data missed expectations Monday on the Empire State Manufacturing Survey and the Housing Market Index. Three pieces of news are expected Tuesday: housing starts, the consumer price index and industrial production.
On Monday, Apple (AAPL) advanced 4% in fast trade. Apple makes up almost 6% of the Nasdaq’s weighting. News that Warren Buffett’s Berkshire Hathaway (BRKA) bought 9.8 million shares of Apple in the first quarter ignited the move.
Blue chips were up, with a third of the stocks in the Dow industrials rising 1.5% or more. Apple is a Dow component, but a dozen stocks have a higher price than Apple in the price-weighted Dow.
Among top-rated world stocks, NetEase (NTES) jumped 6% in brisk volume. The China-based gaming and Internet stock is building the right side of a consolidation but remains 12% off its high.
In IBD’s Stock Spotlight screen, which often identifies potential winners early, Installed Building Products (IBP) struck a new high in moderately higher volume. The company, which went public in 2014, provides and installs insulation, garage doors and rain gutters.
Biotechs, oil and gas machinery and construction equipment groups did best for the day. Department stores were weak.