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Stocks Surge Past Milestones

The Dow surged past 10,000 on Wednesday and the Nasdaq past 2000, as investors become increasingly convinced that an economic recovery is right around the corner.

The ISDEX http://www.wsrn.com/apps/ISDEX/ bolted 9 to 193, and the Nasdaq soared 83 to 2046. The S&P 500 surged 25 to 1170, and the Dow soared 220 to 10,114. Volume soared to 1.7 billion shares on the NYSE, and 2.7 billion on the Nasdaq. Advancers led 20 to 11 on the NYSE, and 24 to 12 on the Nasdaq.

A stronger than expected NAPM services report boosted stocks, and bonds sold off sharply on the news. The Federal Reserve meets again next week to set interest rate policy, and bond traders appear to be pricing in and end to rate cuts. Unemployment numbers for November and Michigan consumer sentiment come out on Friday.

Oracle soared 11% after a bullish presentation by CEO Larry Ellison, even though analysts expressed some reservations about Ellison's predictions.

Sun and Intel gained on positive analyst comments ahead of mid-quarter updates tomorrow. CS First Boston said it expects Intel to guide to the upper end of the $6.2-$6.8 billion revenue range.

FreeMarkets gained 8% on a deal with Mitsubishi, and Ciena also rose 8% on positive analyst comments.

Some technical comments on the market: Note: We include charts in the technical market commentary. If you can't get the charts via the e-mail newsletter version, try this link: http://www.afterhourstrading.com/column.html

One impressive move in the market, especially considering that all the major indices began yesterday on the brink of breakdowns. Most of that move came in about four hours, which fits with the picture of a wave 3 up in the Dow (see first chart below). Our best guess is that the indexes today may have finished wave 3 of the 5-wave sequence that will make up the last leg of an A-B-C bear market rally. If that's the case, the bias should be flat to down for the next couple of days before one final pop higher into the major mid-December turn window. The Nasdaq (second chart) cleared its 61.8% retracement level (1968.59) on a gap up and continued higher from there. However, the index hit its upper trendline today, which could cap the rally for now. That line is at 2080 for tomorrow, the minimum of the 2080-2100 upside target we were looking for. 2025 is first support and then 1980. 1940 is critical support. The Dow (third chart) made an impressive move into 10,093-10,120 resistance, one more reason to suspect that this rally isn't quite done yet. 10,143, the 200-day moving average, capped the rally today, but if the Dow can clear that, 10,260, the 40-month moving average, could be next. Support is 10,100, 10,050 and 10,000. The S&P (fourth chart) stopped at critical 1173 resistance. 1176-1180 is next resistance. 1168, 1162 and 1155 is support. Sentiment is getting pretty lofty by almost every measure but the put-call ratio, which dipped early today but rose the rest of the day. A little skepticism out there still, but tomorrow morning's headlines may change that.

Special report: For a free introduction to technical chart patterns and an overview of last year's action in the stock market, visit http://www.internetstockreport.com/guest/article/0,1785,2571_500051,00.html.