Last Hour Surge


For a while, it looked like the markets were about to surrender their gains at mid-day yesterday, before a last hour surge propelled the major indexes within shouting distance of their highs of the day.

Helping matters was news from China that industrial production grew while retail sales rose sharply. That eased concerns, at least for the day, that Chinese economic growth is deteriorating.

Financials were the other driver of the rally as new global bank capital rules were not as stringent as had been expected. Whether that is a good thing in the long run remains to be seen.

So far, the feared month of September has been very kind to the bullish crowd as the major indexes are all up sharply. Another positive sign is that all three major indexes are now trading above their respective 200-day moving averages for the first time in over four weeks. If prices can stay above these levels, more upside potential may be in the cards.

The number to look for is the high of the S&P; 500 from the past couple of months. I mentioned this 1,130 level last week, which has acted as tough overhead resistance during June and August. A break through that glass ceiling may mean a resumption of the uptrend until the next resistance point (1,200 on the S&P;) comes into play.

This rally also lends an assist to our trailing stop loss points in that our downside risk gets reduced by the percentage your holdings rally on any given day. If the markets turn south, our potential loss will have been reduced by a number less than our original 7% starting sell stop point.

Above chart is courtesy of marketwatch.com.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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