Buyers ignore the data and the worries

Revisions to GDP were worse than expected at -2.9%. The Fed has done a good job of selling traders and investors on the outlook for growth in the second half. The lack of reaction from investors today to the numbers is nothing short of a great sales job by the Fed. Durable goods orders were not much better as they were well short of expectations as well. A negative numbers is never good, but one that is more negative than expected is even worse. Defense spending and commercial airlines get all the blame as autos and small business were actually higher. Some positive in the overall negative report. Tuesday produced positive economic data with a negative response and today produced negative economic data and the markets move higher. Go figure.

We have to take the positive day as a response the negative reactions on Tuesday as just that, a reaction. We stated in our comments yesterday that the cause was an event not a catalyst. Thus, the response today validates it as an event and we look for a follow through tomorrow.

Practice patience.

Notes to Note:

  • Healthcare was up 1% to lead the major sectors of the S&P 500 index. As the scatter chart shows below… the move off the latest pivot low in the current uptrend shows some rotation in the leadership short term. Utilities, energy and telecom have been on top, but pulled back the last couple of days and healthcare is making a move higher in response to the move in biotech and other pharma stocks. M&A is present in the sector as a catalyst as well. Watch for the trend to continue as well as the opportunities for investments.
  • SP500Scatter
  • Energy fell 2% on Tuesday and bounce back 0.7% on Wednesday. Watching to see if this is the extent of it or is there more on the horizon. XOP and IEZ were up nearly 2% to help the cause. Still looking for leadership from the sector overall.
  • Interest rates on the thirty-year bond fell again on Wednesday to 3.38% and TLT rallied again. No fear to speak of in the broad markets, but still money flow to safety assets.
  • Oil prices pushed back towards the $107 level, but still not responding to the Iraq issues for now. If the uncertainty rises again there will be an opportunity.
  • MLPs bounced back from the drift lower and continued to add to the upside today on money flow from the sellers. Still exerting leadership short term and heading higher for now. AMLP is ETF to monitor on the advance.
  • China catches support after two big days of selling. Watching to see if it holds here and bounces or do we continue the downside trek.
  • Natural gas finds support at the $24.60 mark and back to the $25.20 entry point from the last trade higher. FCG was up 2% off the aggressive selling on Tuesday. Still a sector to watch going forward for the trading opportunity.
  • Solar (TAN) bounce off the lows from Tuesday and attempting to hold they uptrend established off the May low. SOL leader on the upside today.
  • Social Media (SOCL) add solid move higher in move off the May low in play.
  • Media (PBS) broke from trading range and set to move higher. See chart below.
  • PBS
  • Internet (FDN) posted solid bounce off support and keeps the uptrend in play.

Solid day for the markets to recover from the modest selling on Tuesday and keep the upside in play. Still plenty of work to do if the buyers are going to maintain control of the process. We again focus on taking it one day at a time and maintaining our discipline relative to the objective.

Practice Patience.