Was the move above 1475 for the S&P 500 index good enough to attract more money and drive the index higher? That would be the million dollar question more or less. The challenge for investors is the aging uptrend, less than impressive earnings and so-so economic data. In other words, where’s the beef? I have done my best not to focus on the data as it will keep you in cash, versus believing in this current push higher for stocks. Not to be negative, but the analyst gushing about how great the markets are going to be because the housing starts were the best in four years. Wow, that means they were pretty bad four years ago. The challenge remains consistent growth in the economy to provide jobs and in turn increase consumer activity. The bottom line… take what the market gives, know where the exits are in the event the trend reverses and relax as this all plays out.
Semiconductors rose two percent on Thursday. That of course was prior to the earnings update from Intel. They confirmed the continued slowing in the PC market. Sales were off along with demand. The good news in there is demand for chips in iPads or other tablets, iPhones or other smart phones, automobiles, etc. The SOX index closed at 412.5 and cleared the 402 resistance. The next level to watch is 442 from here. Digging into the index and looking at the leaders that are breaking higher shows the positive momentum.
Regional banks put on a positive show for the earnings reports. KRE, SPDR Regional Bank ETF was up 1.3% on Thursday and broke from the consolidation pattern formed over the last two weeks. The break on Wednesday started the upside, but the follow through came on Thursday as a result of earnings from BB&T, FITB, HBAN and others. Take some time to filter through the ETF to find the leaders as well. The good news in the regional banks helped offset some of the disappointment from Bank of America and Citigroup. KBE gained 0.8% on the day. The brokers (IAI) gained 1% as the carry over from Goldman Sachs and Morgan Stanley helped lead the sub-sector higher. Financials were flat, but the sub-sectors still offer plenty of opportunities short term.
Speaking of financials… American Express posted in line earnings after-hours. Watch to see how investors react today to the news. Capital One was down 6% after hours on report the company guided that 2013 would reflect their Q4 report. (Revenue down 39%, loss provisions rose 33%, and operating expenses rose 30%.) Not the kind of new you want to hear from a credit card company. The reports from both companies show the negative sentiment in credit card business currently. This could put some pressure on Master Card, Visa and Discover.
Energy sector rose nearly 1% on Thursday. Crude jumped to $96 on the issues in Allgeria which put a risk premium in play. XLE, SPDR Energy ETF broke through resistance at $74 and continued higher. The oil services (IEZ), Exploration (XOP) and Drillers have all jumped higher on the move in crude. Will the upside last if crude prices recede That is a question that will get answered in time, but if the move is minimal and holds above $90 I would say the upside is in play. This is another sector worth digging into the ETFs and finding the leaders worth tracking.
The broad market moved above resistance and confirmed the next leg higher is now in play. There are no guarantees and there is still plenty to worry about going forward. Keep going one day at a time and focus on the goal at hand. It is okay to take some profit off the table as your targets are achieved.