S&P 500 hits record highs

The S&P 500 index moved above 4,000 for the first time ever hitting new highs to end the shortened trading week. Why the renews interest in stocks… more government spending on infrastructure to the tune of $2.4 billion and more to come… thus, investors put money to work again. The NASDAQ joined in climbing 1.8% to add to the move on Wednesday closing the week up 2.6%. The concerns have not disappeared, they have just been put on the backburner. We ended the quarter with the S&P 500 up 1.1% and the NASDAQ up 1.7%… overall things continue along the path of dealing with what is true and what is speculated. Enjoy the long weekend and take some time to review and renew your risk assessment.

Short news notes of interest…

  • Jobless claims rose 61,000 to 719,000 and continuing claims decreased by 46,000 to 3.794 million. The jobs report of April offered some good news with 916,000 jobs added in March. The unemployment rate dropped to 6%. The leisure and hospitality sectors led the upside gains along with construction.
  • ISM manufacturing data jumped to 64.7% in March up from 60.8% in February. That is the highest level since 1983. Growing demand and fewer supplies pushed the index higher.
  • PAVE ETF sees a bump in activity from the Biden infrastructure proposal. TSLA rose on tax credit for electric cars. TAN, WCLD, IFRA, TOLZ are others worth tracking.
  • Construction spending decreased by 0.8% in February. Less than expected due to weather issues. Watching how March bounces back based on the current data coming from the housing sector.
  • Ark Investment Management announced its latest fund Space Exploration and Innovation (ARKX). The final frontier is now an investment opportunity. The challenge is knowing how this whole sector will unfold… but, here is the opportunity to track and watch it going forward.

Sector Rotation and the S&P 500 Index:

The S&P 500 index closed up 46.9 points to 4019. It was up 1.18% on the day. The index moved through resistance at the 3984 levels and hit a new high on the close. Money flow was higher and volume was still below average as the uncertainty remains. Eight of the eleven sectors closed in positive territory as the market finds some buyers to end the month. The VIX index closed at 17.34 and pushing lower. The index remains challenged by my perspective and we will take what is given and manage our risk accordingly. The long-term trends remain on the upside.

Thursday: the buyers remained engaged heading into the weekend as the thought of more spending/giveaways from the government drove money into the markets. The challenge from my view is the move is on lower volume. Energy, technology, and REITs led the upside on the day, while consumer staples struggled giving back some of the previous gains. We will enjoy the long weekend and look for the resulting opportunities moving forward.

  • XLB – Basic Materials remains in an uptrend and closes the week at new highs after testing. Adjusted our stops and watching.
  • XLU – Utilities found support at $61.75… watching how this unfolds. Rising interest rates don’t help the sector. Broke from the trading range and tested the break.
  • IYZ – Telecom now shows a triple top on the chart and Thursday closed above the top of the range… needs to follow through to complete the breakout move.
  • XLP – Consumer Staples found support at the 200 DMA and moved higher… it has tested the move since and watching how it unfolds.
  • XLI – Industrials broke from the trading range and rose to new highs. The test lower held and now we let it play out with stops in place.
  • XLE – Energy surged higher the last month and rose to near term highs. The fall in crude prices pushed stocks lower finding support at $48. Keeping our eye on a move above the $50.50 level.
  • XLV – Healthcare bounced at support and struggled to move back above the 50 DMA. It managed to break higher offering entry for XLV $115.50. We own IHF ($246.50) as the leader in the sector. Managing our risk.
  • XLK – Technology found a way to break from the consolidation pattern on the week. Money flow is higher after testing support… watching the break added a position at $133.50 entry. Stop $130.
  • XLF – Financials are forming a consolidation pattern on the chart. Watching and looking for a break back to the upside. Patience with our stops in place.
  • XLY – Consumer Discretionary has moved sideways following the test lower in February. Showing positive signs from retail and plenty of stimulus yet to be spent.
  • IYR – REITs made a run to new highs as hopes of reopening the country will benefit the retail space available along with a return to offices. Watching and managing the risk of positions. DRE, CSGP, PCH and others breaking higher.

Using the six-month charts as an indicator for the short-term view… Eight sectors are in confirmed uptrends with some sideways activity the last six weeks. Three are in consolidation patterns showing indecision from investors, and none are in a downtrend. The result for S&P 500 index is an uptrend short term with a reversal bias on the charts short term. We remain defensive and cautious about the broad index.

(The notes above are posted at the end of each week based on the activity of the previous week’s trading. The BOLD/ITALIC comments are the current day changes worthy of note.)

KEY INDICATORS/SECTORS & LEADERS TO WATCH:

The NASDAQ index closed up 233.28 points to 13,480 as the index was up 1.76% on the day and closed above the 12,977 support. The index remains challenged by growth being out of favor near term but has seen buyers the last two days. Money flow was higher but remains in a downtrend. Watching how the growth stocks respond. The NASDAQ 100 index (QQQ) was up 1.93% adding to the upside from Wednesday. The $312 support is in play with the close above that level. Semiconductors (SOXX) closed up 3.78% breaking higher and following through. Technology (XLK) moved up 2.06% and breaks higher from the consolidation pattern showing some leadership. Watching and managing our risk.

Semiconductors (SOXX) The sector remains volatile but managed to break higher from the consolidation pattern. The upside move came on above-average volume and strong leadership. This renewed leadership offers some hope to the NASDAQ overall. We added a position in SOXL. Entry $34. Stop $39.50.

Software (IGV) The sector showed volatility again after testing the current lows. The up and down activity shows the uncertainty in the sector. The upside retuurned after going higher with the rest of the technology space.

Biotech (IBB) The sector broke lower from the January highs and has struggled since. The sellers pushed the sector to the 200 DMA and bounced… not overly convincing in the action. Watching for opportunities. Entry $150. Stop $145.

Small-Cap Index (IWM) The sector moved below the 50 DMA as the sellers too control of the near term direction. The bounce off the lows this week was a positive along with clearing the 50 DMA… watching with no positions currently.

MidCap (IJH) The sector tested the 50 DMA bounced off support and watching how it responds to the bounce off support.

Retail (XRT/RTH) The retail sector continues to find buyers and maintain the uptrend. The sector remains in favor despite the GME craziness. Taking what is offered and managing the risk.

Emerging Markets (EEM) The sector tested lower, found support, and moved back to resistance near term. The dollar is an issue along with global concerns about the virus. Patience.

Transports (IYT) The sector has been showing positive signs and leadership for the Dow. Tested lower, but held and moved back to new highs to end the week. The uptrend remains in play. Raised stops.

The Dollar (UUP) The dollar has bounced of late as a safe haven move globally. The bottoming pattern validated the upside move on the chart with the dollar up 4.3% since January. The rise is due to the rise in treasury yields helping the dollar. The Fed let the capital retention requirement expire on March 31st put on banks during the pandemic. That will have a positive impact on both.

The Volatility Index (VIX) Volatility closed at 17.2 breaking below the previous support. This is a positive near term as investor anxiety subsides on the stimulus and infrastructure spending.

Treasury Yield 10 Year Bond (TNX) The yield closed the week at 1.67% up from 1.66% last week. Rates have been rising on inflation fears… negative for bonds. The bonds (TLT) have declined nearly 15% since the highs in January. Raise your stops and protect the gains on the short positions. TBT entry $17.84. Stop $21.04 (adjusted).

Crude oil (USO) Crude moved to $61.41 from $60.99 last week. The commodity rose on Thursday despite the news that OPEC+ will gradually increase production in the coming quarter. Many believed they would continue with the cuts.. Watching as supply and demand will now come into play weekly based on production levels changing.

Gold (GLD) The commodity is struggling against the background of uncertainty relative to the dollar and inflation. The break of support at $166.50 finds support at the $157.29 mark and a small bounce… watching. The bottom reversal remains in play… Entry $162.45. Stop $156.

(The notes above are posted every weekend and updated daily in Bold Print)

DAILY SCANS FOR OPPORTUNITIES AND RISK MANAGEMENT

FRIDAY: Markets closed for Good Friday.

THURSDAY: Scans for April 1st: It was no April fools day as money flow rose and investors put money to work to start the new month. The NASDAQ and S&P 500 moved higher showing a broad move in the indexes. With the long weekend in front of us we added some positions, raised stops on others, and will do our homework to see what opportunities hold the most promise looking forward. Money flow and volume are saying caution. Talking heads are saying stocks run higher. We will let it all unfold and take what is offered.

  • Semiconductors (SOXX/SOXL) raised our stop on the run higher and watching how the leadership holds up.
  • Treasury Bonds (TLT) rates have settled in near the 1.7% level on the ten-year bond giving some reprieve to the downside activity. Watching and managing the risk of our short side positions.
  • NASDAQ 100 Index (QQQ/TQQQ) upside bounce from the test lower is a positive… Entry offered at the $324 mark.
  • Energy (XLE/XRE) solid move higher on the bounce in crude prices and the OPEC news. Watching of entry position if holds the move above the $50.10 level.
  • Software (IGV, SKYY) upside in the sector as the technology sector finds buyers. IGV entry at $340.20 Wednesday. SKYY $87.35 Thursday. Managing the risk.

WEDNESDAY: Scans for March 31st: End of the month, end of the quarter, will money flow rise? Good question as we face a three-day weekend. We will see if there is a follow-up to the rise in the NASDAQ on Wednesday. Semiconductors, cloud software, biotech, and other growth sector posted a solid day, but remain challenged by the current environment of the market. There is still a lack of clarity and direction in the markets near term. We will remain patient and take what is offered.

  • Semiconductors (SOXX/SOXL) the sector added to the upside bounce from last week and we adjusted our stop on the position added last Friday. Stop is not $38 locking in a nice gain if the bounce reverses near term.
  • Drugs/Healthcare (LABU, IBB, XPH, XLV) found support finally and attempting a bottom reversal trade opportunity. Manage the risk and trade accordingly.
  • China (FXI/YINN) attempting a bottom reversal pattern. Hit entry point on Wednesday and managing the risk of the trade.
  • Crude Oil (USO/SCO) downside bias in play as the supply data shows some build up last week. Not a trend. The OPEC+ meeting is Thursday… looking for short side trade based on the data… Patience.
  • Cloud Computing (SKYY) nice bounce and bottom reversal short term… looking for the opportunity if it follows through. PTON, ZM, NOW, CDNS showing some development.

TUESDAY: Scans for March 30th: More of the same as leadership is lacking… money is jumping around, but the lower volume shows a lack of interest on investors’ part. Willing to wait and see how this unfolds. There was some downside in commodities on the day as the dollar gapped higher. There is still an issue related to the virus hurting the outlook with renewed fear tactics from CDC and Mr. Fauci is back taking credit for the vaccines. Plenty of news and little relative to direction. Taking it slow and catching up on my golf.

  • Gold (GLD) Gapped lower on the dollar gapping higher. Watching the commodity as the pressure remains on the downside.
  • Crude Oil (USO/SCO) Moved lower as the Suez Canal reopened and supply concerns rise. The is the OPEC+ meeting this week as well. Watching for the opportunity with my bias on the downside.
  • NASDAQ 100 Index (QQQ) Testing support… looking at the downside trade if it breaks lower. Not a lot of hope in the upside as tech and large-cap growth stocks remain out of favor.
  • Housing (ITB) Solid data from the FHFA Housing Price Index as prices increased 1%… can this sustain as interest rate continue to rise, hitting their fourteen-month high.
  • Transportation (IYT) the backup in shipping and moving goods remains a long-term challenge currently. Thus, the sustainability of the sector remains positive. Railroads are leading, but trucking is doing well along with airlines.

MONDAY: Scans for March 29th: The song continues to be the same… uncertainty creating intraday volatility all based on news. The higher oil prices acting as a tax at the pump, higher commodity prices impacting the cost of food, inflation rising, workers not working due to unemployment benefits… and more. Taking it one day at a time as the chop makes entries and exits near term a challenge and the risk factors are rising. Patience is the key for now.

  • Utilities (XLU) broke higher from the current consolidation showing positive money flow and defensive posture for investors.
  • Consumer Staples (XLP) rotation defined. Gone verticle the last two trading days in a sector that moves like a snail.
  • Healthcare (XLV) broke higher and followed through on the move. Positives from PFE, GILD, and others.
  • Treasury Bonds (TLT/TBT) yield jump again moving to 1.72% after a rest last week. Watching the short side trade volatility of late.
  • Oil Services (OIH) Fell 2.8% and continues to struggle despite the rise in crude oil. Watching the 50 DMA as support near term.

FRIDAY: Scans for March 26th: The buyers came back to push stocks higher to end the week. Some are stating this is due to the rebalancing for the end of the quarter. Whatever the reason money flow was higher overall and investors were looking for opportunities. Whether they found them will be a matter of time to see. Watching taking what is offered with our eye on the near-term moves.

  • Semiconductors (SOXX/SOXL) The sector followed through on the intraday bounce Thursday offering an entry in the sector for a bounce trade. Entry $34.
  • Basic Materials (XLB) broke to new highs as the cyclical stocks rise again.
  • Transports (IYT) broke to new highs again and remains strong in the trend.
  • Homebuilders (ITB/XHB) broke to new highs again and renewing the positive trend in the sector.
  • Small Caps (IWM) followed through on the intraday reversal on Thursday offering an upside trade opportunity.

(The Scans are done daily and left on the page for one week to allow you to see the progression of the opportunities or warnings.)

FINAL NOTES:

Weekend Wrap & Outlook… The market shifts sentiment again as buyers put some money to work. The NASDAQ found support and broke higher from the trading range offering some opportunities on the move. The S&P 500 index broke to new highs showing some leadership again. Economic data is leaning towards growth aided by the stimulus. The economic data shows a positive bias overall with the normal question marks in a recovery. Shipping is leading as there is a backlog of products sitting on docs around the world. Pandemic restrictions and closures continue to show up in the supply of products and raw goods. The move by countries and states to shutdown doesn’t help the fear factor. Energy has been volatile on the news but posted solid gains to end the week on OPEC data. The balancing act for both consumers and investors remains a challenge. The bond market got a reprieve of late with rates holding near the 1.7% mark on the ten-year bond. The dollar has settled following the move higher of late. Overall some positives are arising from the previous negatives.

With that in mind, the markets closed the week with a broad-based move to the upside. The cyclicals are leading and growth stocks are lagging. Value /dividend stocks are in favor over growth and thus they are acting more like growth stocks. Commodities have cooled as money exits for greener pastures of current moves. The long-term trends remain on the upside but I remain cautious about the current environment. For the week technology and REITs led the upside. The VIX index closed at 17.2 and showing some easing of anxiety near term. Watching the current movement in the broad markets as money continues to rotate to where it is treated best.

The goal remains to manage money not the markets or the pundits in the media. Let the future unfold and manage the risk that is. Track the data. Know where the markets stand relative to the facts. Money rotates to where it will be treated the best. Watch the trend, know which side the Fed is on daily, and ultimately the data will establish the longer-term trend. We remain focused on what is working and what is failing. Therein lies the opportunities.

“Vision without action is a daydream… Action without vision is a nightmare.” Japanese proverb

The goal of these notes is to allow you, the investor, to learn how to see the market development as the progression through the sector develops based on news, speculation, and data. Data drives long-term results and develops trends… speculation and news are short-term drivers and offer higher risk trading opportunities. Through the use of both technical and fundamental data, we can have greater confidence in your trading strategies with a disciplined approach to investing and managing the risk of our money.