The ISM Manufacturing number was in line with expectations surprising some, including me. The regional data had been pointing to a weaker number across the country, but somehow we show a rise over February? Interesting as it provided the catalyst for an otherwise weak open. Will we be able to hold the Monday bounce this week? Remember Mr. Bernanke provided the push higher last week that failed to hold on as the selling stepped on the economic data woes. The same is in store this week as the data will provide the boost to move higher or worries to push money to the sidelines.
The S&P 500 index made a solid break to the upside with a new intraday and closing high. The chart continues to show the solid upside move by the index as investors continue to believe the outlook to be rosy for stocks. There are plenty of doubters talking about the move from 2011 and the similarities in the two moves. There is always a reason to throw rocks at the market, but the reality is the reality. If the buyers believe the outlook is good then they will buy stocks. For now the trend for the broad market is higher and it will have to breakdown before the sellers can gain control. Until then you take what the market gives one day at a time.
The Dow Jones Transportation index is of interest relative to the recent activity. The index moved lower off the February high moved near the 5400 mark. The low in March near 5050 was a concern as the sector was lagging. It has since tested the high again and is attempting to make a breakout to the upside. The shippers are gaining some momentum and worth watching the sector overall. SHX the Shipping Index has gained more than 18% over the last three weeks to aide the move higher. Trucking remains a solid contributor with the railroads the laggard. The lower demand for coal has impacted the rails. IYT, iShares Transportation ETF is the simple way to watch and play a breakout to the upside should it follow through.
Apple (up 3.2%) and Google (up 1%) were the catalyst for the NASDAQ to bounce back from the negative moves last week. The factory working issues for Apple weighed on the stock, but that seems to have been forgiven on Monday. The NASDAQ 100 index continues to climb in a positive direction short term. It is overextended, but that doesn’t seem to matter for now. You should still have stops in place in the event the music stops and everyone runs for a chair.
The small cap index gained 1.3% on Monday and moved above the resistance point once again. This is the third attempted break above 463 for the S&P 600 Small Cap index. Last week the move reversed along with the broad market selling. Is the third time the charm? I like the short term upside to provide some leadership if the move breaks higher. The large and small cap indexes made solid upside moves on Monday to lead the market.
I like what I see, but that doesn’t stop me from worrying about the downside risk. Too many investors who have been avoiding stocks are starting to talk about buying stocks. That is a sentiment sign that things are getting pricey and we may be near the end of the move short term. I am not saying anything about selling or running, but I am saying know where the exits are in the event of a fire.