Marketview: Slow Motion March


Interesting week as the Dow ($INDU) advanced to an all-time high and the $SPX tagged a 52-week high. The BOE and ECB opted to stick with the status quo, and the NFP smashed expectations, leaving bulls extremely satisfied. Market participants looking at every twitch of divergence and fleeting signs of weakness are slowly boiled as each divergence is resolved by higher prices. This is the nature of the current market regime: grind higher with pockets of  momentum which produce obvious divergence across assets, then violently shake the tree in back-and-fill corrective moves, and resolve to the upside.

Breadth is still holding up well, and the market remains innocent until proven guilty on the long side. Be aware of the resistance we’re running up against as the $SPX makes a run for new all time highs. Expect volatility. As more and more people jump on this rally, paranoia and the desire to protect gains should be trumping feelings of chasing higher. I read a lot of headlines dredging up old Dow 36,000 (!) meme. Keep your composure. Like last week, I do not have huge conviction on the market because frankly, the market has become quite boring. It’s times like this where disciple in the face of a dull market is key.

Basic materials, financials, and consumer discretionary stocks led the charge while consumer staples, utilities, and energy lagged. There isn’t a huge insight to be gained in the rotation. Clearly it is a risk-on trade in a melt-up week after the volatility of last week. Not a single sector was negative this week.

Relatively quiet week ahead with potential headlines coming from European Council meetings on Thursday and Friday and CPI, PPI and Consumer Sentiment of real interest (all secondary events). Keep watch to see if the gains in the equity market are translating into consumer attitudes towards the economy. As a reminder of the Fundamental Top-Down Macro for the Brain Damaged post, look for a Consumer Sentiment reading above 90 as a sign that the public is getting fully invested.  If we can’t get a decent Consumer Sentiment print on new all-time highs this market may have further to go on the upside, yet (certainly not all in one bite).

Winners: $C, $MET, $BAC, $CSCO, $EMC, $HPQ, $FCX, $SBUX

Losers: $EBAY, $SPG, $NKE, $CAT, $XOM, $AAPL, $AMGN, $UNH



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