Stocks may be setting up for a spring fling.
The S&P 500 is within striking distance of its January 19 high of 1150, and the market this week has literally been inching closer and closer to that level. If the S&P can break above 1150 and hold, it will be a sign to many that stocks would be ready to move higher.
"I can't stress this enough. There are no magic numbers," said Jordan Kotick, head of global technical strategy at Barclays Capital. "But 1150 is important. It is the previous high and it is a short term pivot point."
The S&P 500 closed 5 points higher at 1145 Wednesday, while the Dow finished up 2 at 10,567. The Nasdaq rose 18 to 2358. Financials and tech led the action.
Financial shares have been on a tear this week, especially the companies that were hit hardest and knocked down to low single digits during the financial crisis. Traders though say it is an important move even though it started amid a flurry of rumors and speculation. Most encouraging, they say, was the pricing by Citigroup of its oversubscribed preferred offering.
"It appears there is capital out there that is looking to be put in financials," said one trader, adding that the buyers in the group initially were hedge funds but have been joined Wednesday by more conservative institutions.
The stocks getting the most attention include Citi and AIG, but others have been moving higher, including the sector darlings J.P. Morgan and Goldman Sachs. Regional stocks have also been big movers, including KeyCorp, Regions, Zion and Huntington Bancshares.
"The tape is financially lit," said Michael O'Hare of LaBranche Financial. "If you take the financials away, you have a little bit of a problem. The commodities ran into a little bit of a headwind." The S&P materials sector was down just fractionally Wednesday.
Traders have blamed the low volume market and tiny sideways moves on indecisive investors, afraid the economy could tilt the wrong way. For that reason, Thursday's weekly jobless claims will be watched to see if the number confirms the improving jobs picture seen in the February employment report last week.
The report is released at 8:30 a.m., as is international trade data for January.
"I think Citi got this thing moving...A lot of people are putting money in financial stocks. They were beaten up pretty good and it looks like a new leadership move," said O'Hare.
Keefe Bruyette's Pete McCorry, who trades bank stocks, said the move in financials could be meaningful. "I think you can use the word 'significant.' But I'd like to see volume confirmation of the entire market.. not just the $3 names," he said.
Kotick, however, believes the move in financial stocks is a real indicator that the stock market is poised to move higher. "In the last two to three sessions, the financial sector has begun to break out," he said. The group was the cause of the market's tail spin and its improvement should help lift the entire market.
"We had a Q1 decline. Now we think it's over and we look for a higher Q2," he said. Kotick said he expects the market to keep moving higher for a couple of quarters. "It's going to be higher at year end, but not aggressively higher like 2009," he said.
Look more for a "labored ascent," he added.
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