The bulls had a good shot at closing at the highs of the day, but fell just a little short. Nonetheless, it was a very good day for the bovine crowd, especially those who were long prior to the release of the ISM report this morning. We were already gapping up on optimism about the overseas ISM reports, especially from China, but our report cemented the deal, and we held on to the gains the rest of the day.
We didn't make much additional progress after the news was out, so if you weren't already long, there weren't many opportunities to play catch-up. Volume increased slightly, but it wasn't anything spectacular, though breadth was quite good, with just the gold miners losing ground.
Quite a few folks were quite comfortable dismissing this action as a one-day wonder, driven by beginning-of-the-month inflows. In view of the very high level of bearishness in the sentiment polls, that isn't too surprising. We need a good follow-through now to convert some of the bears, but they are right to be skeptical, given that the overall technical pattern is still quite poor.
The S&P 500 couldn't quite overcome the first level of overhead resistance at 1081, which is the 50-day moving average, but the Dow 30 did squeak past the same overhead resistance by a few points. The Nasdaq remains the laggard and looks the poorest of the major indices.
The bulls now need to show they can hold gains and build on them after a little consolidation. There are still plenty of negatives out there, and the August jobs numbers, due on Friday, could easily kill this nascent rally. It was a good day, but just the first step of many needed to shift us into an uptrend.
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