Leadership Remains Strong

All hail Apple and the dividend! The comments in the media relative Apple was the dominate news, but the impact of the dividend on the stock and the market will be seen over time, not overnight. The positive wave carried the NASDAQ 100 index higher gaining 0.75 percent for the day. The impact of Apple on both the consumer and the investor is evident and the stock has done better than most. Thus, take what it gives, protect the downside risk and keep moving forward, everything else is speculation and opinion.

Leadership in the broad market remains in the technology sector. Apple gained 2.6% on the day and closed above the $600 mark finally.¬†Google was up 1.4% and broke from the¬†consolidation pattern¬†to continue the uptrend off the February low. Broadcom made a break above resistance as well clearing the $38.40 level. These were some key moves among the sector.¬†XLK, SPDRs Technology ETF pushed high keeping the uptrend in play. The concern here is the same…. overbought?¬†That nebulous term keeps coming out in¬†reports about the¬†market short term. There is no argument that the trend short term is extended based on the data, however the market moves on sentiment and for now that is¬†positive.¬†Markets need catalyst to shift directions and thus¬†far, the negative news has not been big enough to shift the¬†momentum¬†nor the direction. Ride the trend until¬†it gives reason to believe it has ended.

Retail was one of the early leaders in the broad market and it continues to push to the upside. XRT, SPDRs Retail ETF has hit new highs and remains in a positive trend. Amazon is one of the ignored parts of the sector, and has formed a solid base worth watching for a break to the upside. The technical set up is on our watch list and if the fundamental data confirms the changes in the company over the last four months the upside could get interesting. Other stocks in the sector are CWTR, Coldwater Creek and BBY, Best Buy are attempting to break higher from consolidation at or near the lows. They may be trades as they are picked up with the sector overall, but they may also be making the necessary changes to improve the fundamental data. Scanning the sector shows some interesting set up technically, for those of you who like to trade patterns with technical analysis scan the retail sector for ideas.

The energy sector is making an attempt to regain some of the previous leadership. Crude oil remains near the $108 level and that is pushing some activity towards the drillers and exploration stocks. There are plenty of consolidation patterns in IEZ, IEO, XLE, etc. They pulled back as crude dropped back near support at $104, but have since started moving back towards the previous high. The refiners have had a good run on increased spreads to boost margins, tankers are seeing demand rise, drillers are pushing more rigs into action and money flow is rising in the sector. All these are positive indicators of upward pressure on the sector. Scanning and digging into the various parts have turned up interesting moves that short term validate the opportunities. Transocean (RIG) broke higher last week on positive comments relative to rig activity. Teekay Tankers (TNK) broke higher on the higher demand in China and India for crude. If the momentum continues to rise the sector is poised to break higher and create solid opportunities going forward.

The leadership for the broad market is in place and until something or someone puts the brakes on the current advance, play the trend and protect the downside risk. Look for signs of the laggards picking up momentum to help keep the trend in play. But, likewise keep a watchful eye on the events that will break the momentum or the trend. As trends mature the noise gets louder about the market being overbought. Remember these are the same voices that said it was oversold for six months before the trend changed. Until the trend breaks the upside remains in play.