Flat Day for Broad Indexes, But Trends are Still Climbing

The market spent the day digesting the move from Friday, but it didn’t build any confidence from my view. The S&P 400 Midcap index showed the most promise on the day gaining 0.4% as it pushed back towards the previous high. There were stocks like 3D Systems (DDD) which gained 8% on rumors of a buyout still pushing the price higher. TransOcean (RIG) was up 3.6% again today as the after-effects of the Mr. Icahn “helping” investors. The challenge remains complacency among investors as the VIX index declined again today to new lows.

What about the worries relative to the Fed and the stimulus cuts starting potentially in December? Still no evidence that will happen other than interest rates jumping in advance of any announcement from the Fed. The bond market was closed for Veterans Day and that accounted for lower volume in stocks. We will see how this unfold the balance of the week.

State of the Market:

The trend of the market remain on the upside both short term and long term. The micro term (13 weeks or less) is where investors are focused currently. Why? The media and analyst feeding them are concerned about the current valuation of the market overall. Thus, the worry factor remains in play, but stocks are still moving to the upside. We have all voiced our concerns about the movement of the market near term, but the key will be to let it play out versus speculation on direction.

Have investors accepted the inevitable cuts in stimulus as the Fed views the economy as improving and the data for October has backed up that belief. The growth is modest and slow to accelerate, but it is growing nonetheless and the third quarter GDP confirms the progress. The less negative reaction to the eventual cuts, the more likely the Fed will actually take action. Like politicians they will wait for the consensus to confirm what action should take place.

Some Trending Stocks to Watch:

Microsoft (MSFT) Broke above the resistance at $36.35 is consolidating in a pennant pattern currently. The trend has been higher off the September low and continues to benefit from the resignation of Steve Ballmer.

Transocean (RIG) is moving higher as Carl Ichan pushed for higher dividends and the company has given in to his wishes. The vertical run has been good for investors, but you need to manage the risk of the move on the upside.

Alcatel-Lucent (ALU) Solid uptrend off the break higher in May. The stocks has been one of the key leaders for the telecom sector (IYZ). The stock has more than doubled during this period. How much more upside? Only time will tell, but it remains a stock worth tracking in the sector.

Oracle (ORCL) Completing a break higher above resistance near the $34 level. The software company fell in June on earnings and has managed to fight it’s way back to the levels prior to the announcement. Earnings are December 16th and the upside is in place until those result either confirm improvement or create another gap lower for the stock.

SunEdison (SUNE) Nice break above the $10.40 resistance and the uptrend off the August low continue to accelerate to the upside. Earnings have been the key driver of late on the upside. Shifting focus to solar exclusively is helping as the sector continues to gain momentum. Watch TAN, Guggenheim Solar ETF as well.

Gogo (GOGO) jumped 28% today an earnings surprise and forward guidance was raised. This is worth watching for a follow through on the upside. They are the internet providers for the airlines. The stock is trading at a new high from the IPO in June.

Fifth Third Bankcorp (FITB) Broke higher from consolidation last week and held the move today. The regional banks (KRE) are doing better than the large banks and they remain an area to watch with rising interest rates helping the sector longer term.

Leading Sectors of Interest:

Solar (TAN) continues to be in a uptrend off the April lows and the current consolidation near the highs is positive. Looking for a break higher as the stocks regain their momentum.

Clean Energy (PBW) surfaced again in the scans of short term leadership. Looking for a move above the $6.90 level short term to continue to current uptrend off the April lows.

Pharmaceuticals broke higher on Friday and they have followed through today. Viropharma (VPHM) ws up 25% on Monday to lead the sector.

Emerging Markets are establishing some leadership on the downside short term. The threat of the Fed cutting stimulus continues to weigh on the sector. Global markets overall have been negative to the this issue.

Retail remains positive off the January lows keeping the uptrend intact. The move above resistance in the sector last month continues to hold and the upside is still advancing.

What to Watch Tomorrow:

Trading Notes tomorrow morning to set the tone for the trading day. Don’t get them? Send and email to don@jimsnotes.com to find out how to try them free.