More Good News From Earnings Keeps Buyers Engaged

Apple sparks rally in NASDAQ on news of expanded China Mobile deal. The DJ Telecom Index gained 1.4% on the day with the news helping lead the broad markets higher. The rest of the data came from the Fed’s Beige Book report that shows the economy continuing to grow at a modest pace. That should lead to the continuation of stimulus cuts looking forward. PPI was up 0.4% overall with the core rate up 0.3% (0.1% expected). No impact from the data despite the higher than expected core inflation at the producer level. The Empire Index offset the disappointment with a reading of 12.5 and well ahead of the 4.0 expected. This week continues to produce data that is just right for the markets to keep the uptrend in play.

The S&P 500 index hit a new high intraday above 1850. The uptrend remains in play and the leadership remains in the technology and financial sectors. Healthcare has been leading as well, but took the day off ending the day flat. As long as the trend remains in play we will go with the trend.

Actionable items of interest today…

Bank of America beats expectations on earnings and bucks the trend in the banking sector. Technically the stock breaks from a two week consolidation and moves back near the 2009 highs. The 80 month moving average is just overhead and a break through that level opens the upside for the stock longer term. For the patient,  this stock is still an opportunity.

Financials (XLF) gained 1.1% with big banks and brokers taking the lead. The move now puts the ETF back near the 2008 highs and at a new 52 week high. The leadership remains in play and we continue to hold our positions.

Telecom (XTL) came back to life today on the Apple announcement. This is a sector we have liked since early December. It has become a stock picking sector and we continue to scan for the leadership and opportunities. F5 Networks broke above resistance at the $93.50 level and has continued to push higher with a near term target of $107.

Retail as a sector continues to struggle as the sentiment towards the sector has shifted to a downside bias. Down 2.9% on Monday was the beginning and despite the positive sales report on Tuesday the sector is under pressure from selling. XRT remained well below previous support at $85.30, but above the next level of support at $83.20. Scanning the sector leaves plenty of questions and plenty of broken charts technically. Worth watching, but the bounce Tuesday may prove to be nothing more than a bounce, and the downside may resume control as online sales are growing versus brick-and-mortar sales stagnant to lower. Watch and see as we hold support at the $83.20 level.

Healthcare was flat on the day, but has been one of the primary leaders. Still a hold unless we break below the $55.50 mark. No changes to the sector for now, but I would adjust stops to protect the nice upside gain short term.

Technology moved back into a leadership role on Tuesday with the upgrade to the semiconductor stocks. XLK gained 1.3% today with the Networking (IGN) up 1.6%, Software (IGV) gaining 1.7%, Internet (FDN) up 0.8% and Semiconductors (SOXX) up 1%. I like the follow through and leadership short term.

Gold testing support at the $119 level on GLD. The outlook technically is for a move to the $124.50 – 126 level short term. If gold is moving we have to look at the mining stocks as an opportunity as well. GDX was up 1.2% and in position to establish a reversal and micro trend on the upside. Not in love with the metal, but I do like the short term trade opportunity.

Bottom line… the market wants to move higher, but I am not convinced investors have made up their mind relative to the economy and earnings. Both are driving the daily activity and that has created the uncertainty. The key is to remain patient and pick your direction as this all unfolds. We are still heading sideways as all this moves forward, but Wednesday produced an upward bias. One day at a time is all we can do. Watch, listen and act according to the discipline you deploy relative to the markets looking forward.