The market wants to go higher as investors are willing to ignore the political posturing in Washington over the fiscal budget issues for buying stocks. The negative comments from both sides, and finger pointing over not wanting to cooperate was mostly ignored as investors focused on buying stocks. Right or wrong, and regardless of opinions the broad indexes posted gains on Thursday. The S&P 500 index closed above resistance at 1415, and the NASDAQ Composite Index close above resistance at 3012. The move higher continues in the V-bottom with on the intraday test on Wednesday. Manage your risk and treat this move as a short term trade. If the longer view develops we will take that as it comes and confirms in the charts.
The base metals made a strong move higher on Thursday with DBB, PowerShares Base Metals ETF gaining 1.7 percent. The move in copper (JJC) was the catalyst behind the gain. Freeport McMoran (FCX) was one of the key leaders in the copper stocks. Steel (SLX) posted a solid move as well. A look at the chart of DBB shows a continuation of the reversal and break above $18.23 resistance and follow through. This is one sector worthy of attention on the upside going forward.
The dollar was under pressure again on Thursday as the Dollar Index dropped to support near 80 intraday before closing slightly higher on the close. UUP, PowerShares Dollar Index Bullish ETF gapped lower at the open of trading, but managed to close near the $21.95 support level. The pressure is on the buck currently as the fiscal budget issues are weighing on the future valuations. There multiple analyst calling for further declines in the dollar as the issues relative to the debt to GDP in the US are mostly ignored by those in Washington and until recently by Wall Street. If the worries continue the look for further downside in the dollar and a move below the $21.95 support.
Healthcare (XLV) is bouncing back from the fiscal cliff fears over the last couple of trading days. The bounce in the healthcare providers (IHF) and pharmaceutical (XPH) on Thursday helped lead the broad sector higher. As the fear over the repeal of the current healthcare bill dwindles the stocks are rebounding. Managing the rising costs versus the profitability of the sector overall remains a concern. Take the upside as a trading opportunity and nothing more at this point. Time will tell how this all plays out.
Two smaller sectors of interest near term are Leisure PEJ) and Gaming (BJK). Leisure made a solid move above resistance at the $22.60 level and shows promise for a move back to the previous high. This is a reflection of the consumer still being willing to spend currently. Gaming was higher with a big push from Las Vegas Sands (LVS) and Wynn (WYNN). The sector is in position to test the May highs near $37. The consolidation patterns are showing plenty of opportunities on breakouts or swing trades near term. The key is having a disciplined strategy for capturing the moves and protecting principle if the trades move against you. Put these on your Watch List near term.
Telecom (IYZ) made a solid move on the upside finally. The chart shows the selling pressure the sector has been under, but it established support at the $22.90 mark and started higher. The move above $23.60 was a positive sign for the sector. Scanning the stocks shows the leaders clearly as well as the losers. Look for a follow through on the move higher and then add to the sector on the upside move.
Today is the last trading day of the month and that means economic data on Monday! We saw positive news on Thursday with the GDP moving higher and pending home sales rising. If the data can mount some positive momentum it will offset some of the drag from the fiscal budget talks in Washington. As always, take it one day at a time and trade your plan.