Stocks break above resistance, putting bears on notice

Tuesday, August 19, 2014 -

The stock market pushed prices higher on Tuesday, helping the tech sector reach new highs while small caps still remain flat for the year and large caps finally rising above their 50-day moving averages.

Either the dealer banks are pushing equities back to old levels or momentum from short covering has helped to move prices above old broken support levels, as tech stocks set new highs again while both large caps and small caps remain well below their 2014 yearly highs.

However, the indexes moved mostly sideways going into the close, rather than continuing their climb. The Dow climbed 81 points (+0.5%) to 16,920, the Nasdaq rose 19 points (+0.4%) to 4,528 and the S&P 500 advanced 10 points (+0.5%) to 1,982. The NYSE finished at +0.4% and the small cap Russell 2000 at +0.35%.

It is believed that stocks benefited from lowered concerns over Ukraine/Russia tensions when it was announced that Putin would meet his Ukrainian counterpart, Poroshenko, next week to move toward a truce.

In addition, the markets got some positive economic data – has the market suddenly switched back to “good news is good news”? We’ll see.

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Ukraine / Russia Resolution in Sight

We laid out in several of our updates over the last week that the financial markets are highly tuned to a resolution of the Ukraine/Russia tensions – particularly, because of potential recession fears should Russia pinch the flow of natural gas into the Eurozone.

Consequently, when traders learned today that Russian President Vladimir Putin is due to meet with his Ukrainian counterpart Petro Poroshenko next week, they were almost giddy – and willing to ignore rising tensions in Israel/Gaza/Hamas.

The Kremlin said Putin will meet with Poroshenko as well as the heads of the Customs Union member-states in Minsk, Belarus, on August 26th, the first face-to-face talks since early June and hopefully a key step in resolving the pro-Russian conflict being waged in eastern Ukraine.

Once again, the European markets welcomed this development, moving strongly to the upside. Naturally, the German DAX moved the most, jumping by 1.0%, while the U.K.’s FTSE 100 Index and the French CAC 40 Index both rose by 0.6%.

Continue to watch the German DAX for a while – it will likely be leading . . .

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