Rotation Keeps the Market Uptrend Moving

The S&P 500 index closed at 1632 and continues to push higher. The leadership rotation to technology, energy, basic materials, industrials and telecom, the markets continue to find ways to climb. Wednesday was interesting in the fact that five sectors pushed the index higher, four were sideways to slightly lower and one lost nearly one percent on the day. Not the best internals, but good enough to establish another new high for the index and maintain the positive momentum.Due to the mix of sector performance it should not be a surprise that the VIX index was moved higher intraday. However, there wasn’t enough volatility to disrupt the uptrend in stocks.

The Dow Jones Industrial Average cleared the 15,000 level on Tuesday and held the upside on Wednesday. Throw in the Dow Jones Transportation Index breaking to a new high as well and you have another positive upside indicator for the broad markets. The Dow Theory believes that you need a positive transportation index to go with the markets overall moving higher. The transports actually led the broader index breaking higher on Monday. IYT, iShares Dow Transportation Index ETF moved above resistance at the $112.25 and hasn’t looked back yet.

Technology, as we have discussed, continues to shine and offer further upside for the broad markets. Semiconductors have been the primary leader for the sector as well. On Wednesday the story was no different as the SOX index jumped 1.2% on the day to continue the upside following the break above resistance at the 443 level. SMH, HOLDRs Semiconductor ETF is one way to participate in the growth of the sector directly. The move above $37 was key to break above the May 2011 high. The runaway gap higher is positive for the sector and any pullback would be a clear indication of a buy opportunity. This is a sector to watch and trade looking forward.

The Russell 2000 Small Cap index cleared resistance and moved to a new high as well this week. The sector has been one of the laggards as investors have favored value over growth, but maybe this is an indication along with move in technology that investors are more willing to take on risk going forward. Need to hold $95 support on IWM, iShares Russell 2000 Small Cap ETF, and look for a move to $98 short term.

Gold is stuck in limbo looking for some buyers with conviction about the upside potential in the metal. I am not sure those buyers are present as long as there are options to find equities with better upside potential versus the risk of gold prices suddenly reversing and being in favor. Still looking for momentum in either direction short term.

Oil followed through to the upside hitting against resistance again at the $97.15 level. If it gets through this mark the upside will likely continue to the previous high near the $100 level. The higher price of crude has helped the energy sector move to a new high as well. The sector as we discussed yesterday offers value as well as growth for investors looking forward.

The upside remains in play, plain and simple. There are some hiccups along the way, but the buyers continue to find opportunities and put money to work. Like most investors I remain concerned about the ability to support this type of move fundamentally. However, we can psychoanalyze ourselves into oblivion. Take what the market gives and remain focused on where you want to exit as much as where you would like to buy. Discipline wins the race and we have to be the more disciplined investor going forward.