Correction? Why stocks actually look set to rally to new highs

Dow futures have a small spring in their step today, hinting at a comeback after the blue-chip gauge’s six-session skid.

Maybe the good vibes come from the Dow finally breaking up with GE? Better off without that old ball and chain, and all that.

Or the nascent rally could stem from trade-war fears easing, though MarketWatch’s Mark Hulbert doesn’t buy that kind of explanation. And some billionaire bears, meanwhile, sound convinced that we’re at the start of a “very major” correction for stocks.

What do the charts say? They suggest a rally is nigh for the S&P 500, according to our call of the day, which comes from technical analyst Mark Arbeter.

“On the daily ‘500’ chart, note the backtest of the breakout area near 2,740,” the Arbeter Investments president writes in a note to clients, as he shares the illustration below.

“With this reset, the index should now be able to take out all that resistance near 2,800 on its way to new highs.”

In other words, the S&P has found buyers after falling to what Arbeter views as a key level (2,740), and its next move could be a leg up to a fresh all-time high. The index closed around 2,763 yesterday, after dropping as low as 2,743 intraday.

Mark Arbeter

As he puts it: “I was looking for a pullback to the 2,740 region, as there is both chart and trendline support in that zone.”

Arebeter suggests we’ve just seen a pause that refreshes. The market had “clearly needed a reset,” he writes, as the mood among traders on Twitter, for example, had become too upbeat.

Schwab’s strategists are making chipper comments as well, following the recent global selloff.

“Trade isn’t the only factor driving equity markets,” that shop’s scribblers write. “The rest of the economic and corporate earnings picture is bright and offers a potential counterweight to trade-associated downturns.”

Key market gauges

Futures for the Dow  , S&P 500 and Nasdaq-100 are higher, after the Dow  , S&P and Nasdaq Composite closed lower yesterday.

Europe and Asia have been seas of green, while oil also is gaining a bit ahead of Friday’s OPEC meeting. Gold is lower, the dollar index is up slightly, and bitcoin is losing ground following news that a South Korean crypto exchange was robbed of $30 million in a hack attack.

See the Market Snapshot column for the latest action.

The chart

General Electric’s stock certainly doesn’t look like one you’d want around these days, as shown in the chart above, which illustrates its two-year performance alongside the Dow’s.

The Dow’s minders said late yesterday that GE will leave the blue-chip gauge before the open on June 26, with drugstore operator Walgreens Boots Alliance taking the industrial conglomerate’s place.

The buzz

Oracle looks set for a down day, after an earnings beat was followed up by weak guidance late yesterday.

Starbucks also is falling in premarket trading after saying it will close more coffee shops, but Winnebago is winning following its quarterly results.

In developments around that family-unfriendly border policy, former Trump campaign manager Corey Lewandowski is drawing flak for mocking a disabled migrant child’s plight. The president late yesterday urged House Republicans to pass broad immigration legislation, but he stopped short of telling them he would immediately reverse the widely condemned policy that has separated thousands of migrant children from their parents.

In trade-tensions news, China’s central bank is showing no effort to devalue the yuan, and the European Union plans to implement tariffs on U.S. goods valued at $3 billion on Friday.

On the economic front, a reading on the U.S. current account is due before the open, then Fed chief Jerome Powell is slated to take part in a panel discussion. And existing home sales are on tap as well.

Check out: MarketWatch’s Economic Calendar

The stock market can suffer from seasonal affective disorder, according to new studies.

The quote

Getty Images

“Canada’s move to legalize adult use is transformational. It makes Canada the first G7 country to legalize cannabis.” — Cowen Research analyst Vivien Azer reacts to our northern neighbor’s big legislative step with marijuana.

Azer puts a value of about $5.2 billion on that nation’s illegal cannabis market. Canadian Prime Minister Justin Trudeau tweets that it’s been too easy for criminals to reap profits, but that’s now changing.

Don’t miss: Why Americans pay more for weed than Canadians

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