U.S. stock indexes broke through resistance at the 50-day line Tuesday in a bullish move that also delivered the most new highs in five weeks. Meanwhile, Goldman Sachs (GS) and Apple (AAPL) signaled what is wrong and right with the market.
XThe Nasdaq galloped ahead 1.7%, while the S&P 500 and the Dow Jones industrial average popped 1.1% and 0.9%, respectively.
Small caps kept to the chase, as the Russell 2000 added 1.1% in another bullish showing.
Volume picked up in the afternoon and stayed up. The Nasdaq and NYSE both showed modestly higher volume compared with Monday, based on preliminary data.
New highs provide an important indicator, and lately the totals have been discouraging. But on Tuesday, the count rose to the most in five weeks, according to preliminary data. This would be another sign that the market uptrend is real.
Bullishness, though, isn't shared everywhere. The banks have had trouble getting credit for any earnings report.
Two Banks Join The Shrug Club
Goldman Sachs became the latest big bank to report strong quarterly results and then shrug off the performance. Goldman's earnings came in well above estimates. But the stock reversed to a 1.8% loss in heavy volume.
Dallas-based Comerica (CMA) reported a 51% increase in earnings, above the consensus estimate. The narrow beat earned a slap in the face as the superregional stock fell 3.5%.
The banks recently have shown that the most dangerous thing for them is to beat earnings estimates.
Besides topping earnings expectations by about 25%, Goldman boosted its dividend by 5 cents to 80 cents a share.
Other big banks did just fine Tuesday. Bank of New York Mellon (BK) rose 0.4%. JPMorgan Chase (JPM) was flat. Bank of America (BAC) added 0.4%.
Why the trouble among banks and their earnings beats? Uncertainty surrounds the proposed changes to the Dodd-Frank law. Banks don't like the Dodd-Frank regulations, but the Republicans have not been able to unite on a plan to either repeal or amend the law.
The selling in bank stocks could be profit-taking, given the run-ups many banks enjoyed in 2017.
Apple Shows What's Right
Meanwhile, Apple is showing that no news can be good news. Apple rose 1.4% as it notched its ninth gain in 11 sessions. This was accomplished without an earnings report.
Apple will report quarterly results May 1 after the close. The stock is only 3% off its high, forming a base with a 183.60 buy point.
Analysts expect Apple's quarterly earnings to jump 29% to $2.70 a share. A 29% gain would be Apple's best in 10 quarters.
Taming The 50-Day Line
The 50-day line had been a problem since mid- to late March for the Nasdaq and the S&P 500. The indexes broke above the 50-day line Tuesday morning and closed above the line with no trouble along the way.
A close above the line helps validate the market's uptrend.
If the 50-day line has been converted from resistance into support, the next resistance area would be at the 7500 price level for the Nasdaq and the 2800 area for the S&P 500.
Apart from those technical tests, the market is still vulnerable to news events. China announced Tuesday that it would slap a tariff on U.S. sorghum imports. The move followed the U.S. decision Monday to ban U.S. firms from selling parts to Chinese phone maker ZTE Corp. for seven years.
The U.S. Commerce Department said ZTE violated an agreement when it shipped U.S. goods to Iran.
Bullish Action
Cloud security provider Qualys (QLYS) broke out of a flat base in heavy volume. The stock surged 5.7% to clear a 79.50 buy point in a flat base. The pattern, though, is a late-stage one.
Chemical products maker Celanese (CE) gapped up about 4%. The stock broke above a 109.35 buy point in a double-bottom base. A double-bottom base is shaped like the letter W. The middle peak is the buy point.
Meanwhile, the FANG stocks were up without exception midday Tuesday. Facebook (FB) added 2%, Amazon.com (AMZN) rose about 4%, Netfix (NFLX) jumped 9%, and Alphabet (GOOGL) picked up 3%.
Netflix's gain came after reporting results and strong subscriber growth late Monday.
Some stocks made new highs, but strong volume was missing. For example, Domino's Pizza (DPZ) rose 2% to clear a 236.10 buy point in a base-on-base pattern. Without strong volume, there's no sign that funds are driving the move.
Among IBD's 197 industry groups, the day's best performers were mostly tech-oriented groups. The biggest losers included tobacco, meat and soap — the defensive areas.
Coming Up Wednesday
Companies reporting earnings Wednesday include banks Morgan Stanley (MS) and U.S. Bancorp (USB), aluminum maker Alcoa (AA) and blue-chip American Express (AXP).
The Federal Reserve's Beige Book report for March will be released Wednesday at 2 p.m. ET, according to Econoday.
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