Markets close the week on a high

Jobs report wraps up the week with the final economic data that was inline with expectations and just enough to pacify the market. That was the perfect end to a fun filled week that was led by money flowing in to hit new highs and show the buyers are still in control… for now. The S&P index was up 1.2%, NASDAQ 100 index gained 1.5% and the Dow was up 1.2%. Small caps gained 2.6% to lead the indexes for the week. Overall good week for the buyers and everyone goes home with a big smile.

I stated last night the markets look extended on the charts, that doesn’t matter if the buyers are willing to put money to work or take money from bonds and cash to buy equities. The rotation has been slow, but progressive nonetheless. How long it lasts is the concern we have to manage going forward. Don’t worry just set reasonable stops and give some room for volatility. The trend is higher and that remains the direction of choice.

Global markets are equally engaged with Europe (IEV) hitting new highs. EAFE index (EFA) closes at new high and Emerging Markets (EEM) bounce back and break to a new high on Friday as well. The news from the ECB helped set the stage for the rally to continue with more stimulus and the promise of quantitative easing to come in the future. More money to put to work in the global markets.

Take a break and enjoy your weekend. Rest and get ready for more fun next week. The Weekend Trading Notes will be posted on Saturday along with the video update. See you Monday…

Notes to Note:

  • Amazon gained more than 6% on the phone rumors Thursday and added 2% on Friday to push the stock through the downtrend line and complete the bottom reversal pattern in play. The clamoring is over the belief they can tap into their database of customers to be successful with the product. Only time will tell and the news is out… watch to see if test or continues higher.
  • Apple will close the week near the $650 mark and open on Monday at approximately $92 per share. The 7/1 split will take place over the weekend. How much impact will it have on the stock? Watch Monday and see.
  • Treasury bond yields close the week at 3.43% on the thirty-year bond and 2.59% on the ten-year bond. Small bounce, but no definable reversal in the bonds. Watch to see how this plays out next week as well.
  • Gold stopped the downside move, but still not looking healthy enough to rally yet. Looking for support to hold at $119.45 on GLD. This is on the watch list for next week as well.
  • The Volatility or VIX index tried to push above the 12 level, but fails to make any serious move towards the worry side, closing at 11 to end the week. Unless something changes or a catalyst evolves it is likely to remain or move even lower on a further rally in equities.
  • IWM – small caps made the big jump on Thursday gaining 1.9% to lead the indexes. Back above the $113 level again and in position to clear $115 resistance? Accomplished the later on Friday and we head into next week with the growth stocks making a move on the upside to lead.
  • Financials break to new high as the sector continues to melt higher with a nice push on the week. Insurance held the 2% move from Wednesday and added a modest gain today.
  • Banks made solid move to follow through on the upside. This is still a positive for the broad markets as the financials need to be in the picture if the trend is going to accelerate. KRE was up 2% on the day as well.
  • New highs, new sentiment, new buyers and everything positive. Should that create worry? Patience and focus is all you need, leave the prophecy to others.

Chart Notes:

The NASDAQ 100 index (QQQ) is back to the leadership roll that started this push to the upside on May 15th. Posting a solid gain on the week the ETF closed above the $91.34 level of resistance or a new high. The chart below does a better job than I can explain of the reversal on April 11th to the new high today.

qqq

The S&P 500 index hits new high as well and you can see the follow through since breaking above the 1890 resistance. Uptrend is in play and the acceleration away from the long term trendline is growing. The further it moves the greater the short term risk for a test of the move higher. Keep you stops in place relative to the risk you are willing to accept.

SP500

Russell 2000 Small Cap index completed a reversal of the move lower, bounce, test and move higher. This is the sector many have pointed to for validation of the current break higher in the indexes above. This move is worth watching to see how high it moves. It will continue to give insight into the willingness to take on risk in portfolios near term. Be patient and see how it plays out.

RUTX

Plenty of moves on the upside this week and the markets solidified the next leg higher for the buyers. We have to exercise patience on both the buy and sell side of this market. The upside is in play, but the worry is rising as the market gets more overextended. The short term expects the worst and the long term is still content the upside is engaged.