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Minyanville's T3 Daily Recap: Market Breaks Through Key Resistance


Heavy equipment makers and natural resource companies should benefit from the China stimulus.

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US stocks gained Tuesday on news that the Chinese government plans to move ahead with stimulus measures and amid hopes that Greece may yet remain in the euro. However, on the first day of trading following the Memorial Day holiday weekend, stocks were unable to build much on the gap up due to concerns about the solvency of Spain. Those fears dropped the euro below the $1.25 level.

The news out of China sparked a big rally in Asian stocks, especially in heavy equipment makers and natural-resource stocks that could benefit most from the stimulus. Caterpillar (CAT) and United Technologies (UTX) led the Dow gainers.

Stocks surged early in the session despite a weak consumer confidence reading, similar to the pop experience in Japanese markets following a poor employment report. The typical explanation for such price action is the expectation of stimulus or monetary easing in the face of worsening conditions.

In Greece the pro-bailout New Democracy party is polling ahead of the anti-bailout Syriza party. Those polls suggest that Greece's exit from the euro isn't the inevitability it was once believed to be.

Technically speaking, the market broke above a recent pivot high from last Tuesday, and was able to close above it with a late afternoon rally. However, given the volatile headlines and lack of volume on the bounce, it's hard to be enthusiastic about buying stocks in this area.

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Scott Redler is long AAPL, LVS.
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