(By Rich Bieglmeier) In yesterday's i On the Market newsletter, we alerted readers that the market tend to rally following the NASDAQ's first breach of it 50-day average. Typically, the index runs up approximately 100 points within a few weeks. After the fun, selling resumed and stocks floundered for the next month to six months.
We aren't sure the rally started yesterday, but the Dow and S&P bounced off their 50-day averages. Until the pair breaks the key benchmark, we believe that the odds favor the start of the brief U-turn. Investors will know with 90% certainty if the indexes turn red, test support, and then move higher. By the same token, if the Dow, NASDAQ, and S&P close below Friday's lows, then you know that sellers will probably take over.
The reason we think the odds favor more gains in the days to come is because equities sold off following a green start, and then buyers took over and closed the indexes near the day's highs.
Retail Sales and Citibank's earning received credit for the positive mood to start the week. iPhones, cars, and gasoline are the reasons for the better than expected retail results. Citi managed to top expectations, but iStock wasn't so impressed with the details.
Investors will be watching profit results from CSX Corp. (CSX). The railroad's guidance will give traders insight as to how the economy is performing. The street is calling for 43 cents for the quarter, but their ears will be tuned for forward looking statements.
The Goldman Sachs Group, Inc. (GS) will be another highly watched quarterly report card. With the Federal Reserve lending financial institutions money for free, only imbeciles could manage to fail to turn a profit. The consensus in $2.12 and we think they'll surpass expectations.
Intel Corporation (INTC) and International Business Machines Corporation (IBM) will be trendsetters. Intel has warned, already, that the future isn't so bright. IBM, on the other hand, is expected to do well. Big Blue has walked by analysts' forecast for at least 16 quarters in a row. We think it will be 17 after the market closes tonight.
Finally, it is sector Tuesday. This week our review found the balance tipped heavily into the bulls favor. Some of our favorites include Media, Paper, and Healthcare stocks. We'll have our full review up shortly, come back to check it out.