Marketview: Pressing Highs

• Posted by DynamicHedge
• on January 19th, 2013

Despite the fact that the market felt as if it went nowhere, we managed to digest gains and make new highs. Going out on the high on Friday is a characteristic of a very strong market.

Earnings season kicked off with good reports from $GE, $GS, and $JPM. Housing numbers were a massive surprise to the upside, suggesting that the housing recovery is moving faster than previously thought. Jobless claims came in at a 5-year low. Even with seasonal flaws this is a good number. Breadth continued to make new all time highs this week, indicating healthy participation.

$AAPL remains in a troubling downtrend and market bellwether $BAC corrected after leading the charge in the last couple weeks. Energy prices are trending higher and reaching levels which warrant increased attention. Over 90% of $OEX stocks are now participating in this rally. This usually signals the tipping point where I start to get worried about the markets getting a little choppy and topping out. Keep in mind that this reading can stay above 90 for weeks and months at a time during strong bull markets.

Money flowed into the energy sector (particularly oil services), industrials, and consumer discretionary.  Lagging sectors were basic materials, financials, and technology.

The effects of the bull market are finally starting to make an impression on market participants. There’s a point where people stop worrying about jack-in-the-box bearish news and start looking at the silver lining. I think we’re there.  The combination of belief in the market with the flow of funds from fixed income to equities could result in a powerful continuation of the rally.  Consumer sentiment is still depressed and has a long way to go (above 90) before bullish sentiment tips over into a new bear market. I’m quite wary of pullbacks and choppy conditions in the short-term, but our indicators remain bullish and recent action suggest price discovery to the upside is still the primary trend.

Winners: $BHI, $SLB, $HAL, $GE, $LOW, $HD, $DIS, $CMCSA

Losers: $BA, $INTC, $GOOG, $BAC, $USB, $AMGN, $V, $MA

 

Enjoy the long weekend.

 

 

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