Marketview: Former Resistance Levels


New week, new all-time highs. The big news was the Dow closing over 15,000 for the first time in history. The Yen finally crossed the 100 mark after toying with it for a month. Weekly jobless claims came in very low. Bernanke put banks on notice as they signaled some push back over regulatory reform, and the Fed mapped out portions of its exit strategy from QE.

This week we saw industrials, consumer discretionary, and financials lead the market higher. Utilities, consumer staples, and energy lagged far behind. A big part of the sustainability of the recent up move is basic materials, industrials, and technology cycling into leadership positions. The former leadership sectors of healthcare and consumer staples represented a limp one-foot-in-the water trade as investors refused to go all in as the market tested the upper side of the range. Risk sectors catching a bid is definitely healthy.

The market has gone from walking on pins and needles to a bit of a swagger. It used to be that any small data point or regional flare up felt as if it would wake the market from a QE-induced dream state and put us back into the crisis markets of 2008. As we noted many times during the uptrend, each of these little tests has made the market a little bit more resilient. The march higher continued and the Fed refused to blink. Guess what, it no longer feels like any old data point can wreck the rally. This does not mean that it can’t, but this is the current sentiment. The dream state is becoming more and more like reality (there’s a big economics lesson there). This type of confident momentum becomes self fulfilling, and that is what we are seeing right now carrying us to higher prices.

One of the key drivers of this rally over the last couple years has been betting against the bears. The problem is that there are much fewer bears to bet against now as there were before. On the other hand, we are still relatively early in the cycle of bullishness according to consumer sentiment readings. Which means there are not enough bulls crowding the bus to field an aggressive contrarian stance. So what’s left to do? Sell stocks that get overheated and buy stocks that get sold off irrationally. We felt the market was a little over extended a couple weeks ago, and it turned out to be too early. We did not indicate in any form that we were bearish on equities, just that after a nice move, it is prudent to take some off the table. How much higher the market goes is anyone’s guess. This can be the most frustrating time for those who wish to remained disciplined in the face of seemingly easy wins. In the long run, discipline pays and I’m maintaining a long-term bullish stance while a neutral in the short term.


Winners: $BAC, $MS, $APA, $FCX, $FDX, $UNP, $GOOG, $NWSA

Losers: $AEP, $SO, $GILD, $ABT, $OXY, $MCD, $TGT, $WMT

Below is the MAMOx, which as of this week is still negative and one of the factors keeping short-term bullishness in check.


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