Everything was going according to the script today until the Treasury Department released its currency report:
The major indices rebounded into positive territory Tuesday, setting aside previous inflation concerns, after the U.S. government heightened pressures on China to revalue its currency. The move was greeted by investors as meaning that U.S. products would be more competitive against their Chinese counterparts.
In a semiannual currency report, the Treasury Department warned China that it would be labeled a currency manipulator if it does not let the yuan float more freely against other currencies by the time of the next report. But the report did not find China guilty of manipulating its currency currently, providing relief to traders worried that a more combative stance could trigger a trade war.
Following the Treasury report, which also gave the dollar a boost, the Dow Jones Industrial Average bounced from an intraday low of 10,213.14, closing up 79.59 points, or 0.8%, to 10,331.88. The S&P 500 rose 8.11 points, or 0.7%, to 1173.80, off an intraday low of 1159.96. An analyst upgrade of Exxon Mobil (XOM:NYSE – news – research) and the higher price of crude oil helped energy stocks recover from recent losses, further boosting the blue-chip averages.
The Nasdaq Composite gained 9.27 points, or 0.5%, to a one-month high of 2004.15, after touching an intraday low of 1980.94.
Volume was on the light side once again but it was better than yesterday’s volume. I wouldn’t have thought that this China ‘news’ was what we needed to get through all of the resistance I’ve been pointing out but, at least for today, it did the trick. While I’d still like to see more volume it’s tough to argue with the price action. I won’t be surprised to see the Naz drop back under 2000 but at the same time I won’t even consider getting short until after it’s done so. The Nasdaq is now back above both its 50 and 200-day moving averages (death cross be damned???), above 2,000 and basically right on its 2005 downward sloping trendline.
