Monday-Wednesday’s Action: Stocks Rally Into Resistance
Stocks rallied nicely on Monday as investors returned in a buying mood from Friday’s jobs report rally. The PMI service index slowed to 55.1, missing estimates for 55.8. The ISM service index also slowed to 56.9, missing estimates for 58. This is the latest round of slower-than-expected economic data which followed September’s tepid jobs report. This confirms our thesis that Main Street simply is not ready for a rate hike, even though Wall Street is. Stocks opened higher on Tuesday but quickly turned lower after the major averages encountered resistance near their declining 50 DMA lines. Biotechs dragged the market lower (again) and were down another 6%.The International Monetary Fund (IMF) trimmed its global growth forecast for 2015 from 3.3% to 3.1%. The IMF said weakness in emerging markets are weighing on the global economy.
Stocks edged higher on Wednesday as the major indices flirted with their respective 50 DMA lines. Commodities, materials and transportation stocks led the market higher as they continued to bounce from deeply oversold levels. The weekly MBA Mortgage Index surged 25.5% which followed last week’s decline of 6.7%.