NASDAQ Takes the Lead with Growth

Markets continue to believe in the renewed efforts to believe in the Fed and the future growth of the economy. The NASDAQ has enjoyed two days of buying and has gained better than 2.5% in the process. The index tested the lower channel line and support near the 4125 mark last week, but managed to close higher today at 4267 and back above the previous support at 4250. Technology, biotech and small caps are leading the way higher for the broad index. These are the same sector that led the index lower over the last three weeks. For now the buyers are back.

The economic data was better today with the ISM manufacturing growing to 53.7% and slightly below the expectations. Construction spending was better than expected up 0.1% and auto sales were better at 16.4 million versus 15.8 million expected. Thus, the economic data gave the market a boost at the outset and it never looked back posting solid gains on the day. Watch $165.10 on DIA as upside opportunity.

The triangle pattern we discussed on the S&P 500 index gained and upside bias on Monday and broke higher today to 1885 and a new closing high. This is worth watching short term for a follow through and trade opportunity on the move, with an entry of $189.10 for SPY. The Dow cleared the 16, 460 mark of resistance and is now challenging the December high. 

Moves worthy of NOTES:

Telecom (IYZ) is made a break through to a new high as well on the day. The move through the $30 mark puts the sector at a new high currently. CBB, USMO, S and LVLT were clear leaders for the sector. With the break higher we will look to see what stocks offer upside opportunities going forward.

NASDAQ 100 index (QQQ) was up 1.7% on the day and the large cap leadership was important to the move of the broader index on the day. This is the component that sold the hardest recently due to stock like NFLX, AMZN and PCLN struggling. Today they each added to the upside move, but the large cap biotech were some of the biggest gainers, CELG up 4.9%, GILD up 3.9% and ISRG up 12.6%. Definitely a change of heart for the sector overall the last two days.

Semiconductors (SOXX) gained 1.6% on the day and broke to a new high. The leadership from the sector remains one of the bright spots for the broad markets. The biggest gainers were stocks that also sold the most of late. SUNE, RBCN, MRVL and MU. Watch to see how it plays out from here.

Small caps (IWM) were up 1.3% and through the $117.50 resistance. Watch and see if the index can recapture the $120 level in the current rally.

Still watching the global markets relative to the US in follow up to last weeks gains. Europe (IEV) added to the upside with another gain of 0.6% and back near the previous highs, but lagging the US markets to start the week.  The EAFE index (EFA) enjoyed a positive day as well with a modest gain of 0.6% and inching towards the previous highs. Emerging markets (EEM) cleared resistance again at the $39.50 level providing a trading opportunity. There is plenty of challenges still facing the global sector, but the move is worth our attention and a trade opportunity.

How do we adjust and/or use the current data to help currently?

Started the quarter with a bang and some positive economic data. If Monday was window dressing for the first quarter, today was desert. The real response to the economic data was positive and we will have more to deal with tomorrow. The movement from growth to value stocks was taking place, but the bounce the last two days came as a result of traders buying into the oversold growth stocks or at least trading the move. The small caps, technology and biotech stocks bounced nicely and treasury bonds sold more on the day. We are just getting started and I expect the fun to create volatility and opportunity.

Go to the Daily Trading Notes for more details of our strategy for the trading day.