Rally Built on Technical Victories

One of the great ironies on Wall Street is that the higher stock prices climb, the more people want to buy them. This quirk of human nature (traders are people, after all) was boldly displayed Thursday, as gains begat more gains.

Building on Wednesday's sharp rally and strong results from Hewlett-Packard (HPQ) after the bell, stock proxies bolted higher early Thursday. Some positive economic data furthered the advance, which helped major stock proxies eclipse some key technical resistance points. That, in turn, spurred further gains that held up through the close.

At day's end, the Dow Jones Industrial Average was up 2.6% to 8845.15, its highest close since Aug. 26, after trading as high as 8856.57. The S&P 500 gained 2.2% to 933.76, compared with its intraday best of 935.15, and the Nasdaq Composite rallied 3.4% to 1467.56 after trading as high as 1468.72.

In terms of technical accomplishments, the S&P 500 eclipsed its Nov. 6 closing high of about 923 and the Comp bested its Nov. 18 intraday high of 1425, establishing its highest close since June 19. Adding to the significance of the upside breakout, more than 2 billion shares were exchanged in Big Board trading, compared with the 10-day moving average of about 1.3 billion. Gainers bested declining issues by 11 to 5.

Advancers led by a similar spread in Nasdaq trading, where a solid 2.1 billion shares changed hands.

Elsewhere, Microsoft (MSFT) traded as high as $58 before closing up 1.9% to $57.84, surpassing resistance at about $57.50. I've written previously about the significance of a possible Microsoft breakout, and the market-cap giant's success this time around could portend further gains for the major indices.

In the "close, but no cigar" department, the Philadelphia Stock Exchange Semiconductor Index traded as high as 366.36, but couldn't surmount its Aug. 22 intraday high of 367.90; the SOX closed up 7% to 361.90. Similarly, the Philadelphia Stock Exchange/KBW Bank Index traded as high as 797.12, failing to breach 800 for the first time since August, before closing up 2.7% to 794.76.

Bulls on Parade

Throughout the market's over-six-week rally, the ongoing debate has been over its sustainability. Thursday's session convinced those already bullish that more gains are forthcoming.