There are more questions than answers relative to the current market environment. As stocks continue to churn sideways with both the buyers and the sellers content to wait and see, we all have to take on a theme of patience. Despite the major indexes doing virtually nothing over the last seven trading days, there is activity in sectors to watch.
Energy has been one of the leaders in the bounce off the recent low. Gasoline, refiners and the services companies are still moving higher. UGA gained 2.4% on Wednesday and broke above the previous high at $58.50. I have been writing about this several weeks as the move higher has continued. The refiners have been benefiting as well from the move with solid gains to the upside.
Technology remains a positive for the broad markets and Cisco’s earnings last night should help the sector move higher. They posted better than expected earnings and raise their dividend 75% which puts the yield near the 3% mark. The latter will attract dividend investors. The stock was up more than 5% in after hours trading. NetApp posted better than expected earnings as well and was up 5.4% after hours. Look for the seven day consolidation in the technology index to break higher as well as the NASDAQ 100 index.
Retail stocks are attempting to make a move higher from the recent consolidation and lead the consumer discretionary index higher. A move above $60.80 on XRT, SPDR Retail ETF is on my watch list short term. Wal-Mart could set the tone for the sector as they post earnings prior to the open today with high expectations. This remains a stock picking sector. Dig into the part to find the leaders. We have posted plenty of data on the sector over the last month you can review as well as the watch list on my TC2000 club.
The love for gold by investors remains, but the metal isn’t reciprocating. The World Gold Council stated that demand for gold fell to its lowest levels in two years. China and India have slowed purchases and the Central Bank buying hasn’t been enough to replace the demand. Consumption fell 7% in the second quarter, showing the steady decline in demand. This would explain the recent stagnation in the price of gold as it has traded sideways since June. This would leave speculation as the primary driver of price and that isn’t a game I like to play. However, the stimulus expectations could impact the upside of gold and India may return to buying more gold as their economic picture stabilizes.
Is it just me or has the worry about Greece and Spain disappeared? All the talk about the EU financial collapse and insolvency issues seemed to have left the headlines and the VIX index. When did we resolve all these issues? The silence is worrisome and it is cause to address downside risk in your portfolio. Since the all encompassing comments from Draghi that the ECB will do whatever it takes to rescue the euro on August 2nd, the markets have rallies nicely. The challenge is nothing has been done by the ECB to correct or defend the euro. Thus, the risk factor continues to rise relative to the challenges in Europe. I am of the opinion it is prudent to have an exit plan or establish a hedge against the risk relative to your portfolio. We continue to raise and adjust the stops on positions currently.
As the market churns in place remain focused and protect against the downside risk. The sentiment shifted to positive on the hope of stimulus from around the globe including the US. None of that has materialized and investors have been extremely patient to this point. At some point it will be put up or shut up for growth or stimulus. Until then manage your risk and manage the trade opportunities as they are presented by the markets.