The buyers remain in the mode of adding to portfolios. The NASDAQ again climbed and cleared the January high at 4246 on Tuesday. Full-speed ahead is all I am reading and for whatever reason many are listening and putting money to work in stocks again. The ‘V’ bottom pattern on the selling in January is now back at the top again. As I have stated in our updates the last couple of months the technical data is what to follow short term as the fundamentals just don’t matter. I can state very well what is not healthy about the economy, but for whatever reason Wall Street and the Federal Reserve has convinced investors that the future is bright and to put money into stocks. This is not that unusual, in the final stages of a bull market it tends to attract the most money.
What does that mean to you and I? Why fight city hall? Take what the market gives based on the technical data short term, keep your stops in place and tighten them as things get too ahead of themselves. Simple is the best course of action currently. Too much thinking in these situation tend to lead to making mistakes.
As we discussed this weekend there is some rotation relative to leadership and money. Technology has been leading the indexes higher with semiconductors, networking and internet stocks taking the lead. Healthcare has kicked in again on the upside with pharmaceutical and biotech taking the leadership role. The providers have moved up nicely the last two days and adding to push higher.
Energy has joined in the move higher with crude oil climbing back to $102.70 on Wednesday. The commodities are making a move and the stocks are trailing, but looking promising if the trend continues near term. Natural gas was up 5.2% today and the stocks were up 1.3%. This discrepancy in the commodities versus the stocks has been going on for awhile. Looking for the stocks to play catch up as they go forward.
The consumer sector remains a challenge relative to sentiment. Consumer services has moved back to resistance, consumer staples continues to lag and retail needs to move back above the 200 DMA. This is a sector that will need to participate on the upside is the broad indexes are going to make a move higher that is sustainable.
Financials are lagging with no indication of picking up momentum. The banks are the challenge as the issues relative to profits and lawsuits still remain. Until this clears up it is a stock picking sector.
The global markets are enjoying the revival of the US indexes as it has helped Europe, the EAFE index and to some extent emerging markets rally. Can the push continue if the US falters? There is the bigger question from my perspective. All remain trading opportunities to me at this stage and if that develops further worth making the necessary adjustments.
Large cap stocks remain a drag on the indexes for now. This could be another indication that the stimulus from the Fed didn’t work. It could be the impact of new healthcare. If could be the impact of earnings.It could be higher entry level wages? There are plenty of reasons the sector has lagged the broad market. But, it has not helped across the board performance. Watch to see how it plays out going forward.
Another positive day for stocks and plenty of things to watch moving forward. One day at a time remains the theme for this party.