Market Alert - The Close

The life breathed into the market this past week, first in relief that Clinton was sure to win as the FBI proved itself useless yet again, second with excitement that Trump would bring growth policies back to the US. Fickle? Of course. The market finds a reason to do what it wants. The notion of real stimulus after 7 years of nothing but FOMC artificially low to no rates is indeed exciting. As is the removal of regulations and taxes that have killed the US middle class and thus its built-in source of creativity, supply, and demand. That is worth a few stock market points.

Friday the stock indices continued higher though for some it was not a straight shot higher and indeed, SP500 closed the session negative. NASDAQ was up after the sharp Thursday reversal, but it was nothing that makes you feel warm.

On the other hand, RUTX exploded higher, now less than 2 points from the 2015 all-time high. SP400 midcaps added another percent, moving past the 2015 high and on its way to challenge the September all-time high. DJ30 posted a modest move but a new high again. SOX recovered the trendline and surpassed the late October lower high.

SP500 -3.03, -0.14%
NASDAQ 28.31, 0.54%
DJ30 39.78, 0.21%
SP400 0.99%
RUTX 2.46%
SOX 3.86%

VOLUME: NYSE -15%, NASDAQ -24%. It had to drop at some point and better it falls on a day when DJ3, NASDAQ, and definitely SP500 did not have their best showing of the week. Still above average, solid upside volume on the week.

A/D: NYSE 1.2:1, NASDAQ 2.3:1. Still not huge breadth as some areas get money, other areas lose money.

The indices have surged all week, more or less, some areas getting much more attention as money rotated to Trump stimulus areas and out of those that had led the move and were dropped like hot rocks. Some opined it was something to do with animosity between Trump and silicon valley, but that is poppycock. The market was simply shifting to new leadership.

Now we would like to see a pause. The move was strong and if the leadership groups show a pause or test we can use that. It may not be anything more than a pause similar to what C did Friday; powerful moves often just need a pause to refresh and then they go again. Thus, we will look at playing some pauses such as more positions on C, but didn't spot a ton of those on the early scans.

Of course there is the possibility that the 'Clinton will win, Trump won so let's rally anyway' rally runs out of steam. NASDAQ looks far from well and SP500 is still challenged. If money is simply rotating, however, that explains the uneven stock index movement. Still, after such a good run you see how the indices test and if it is just a test. There is not much if any fear in the market right now and that is always worth considering. A bit.

We booked some strong gain on NVDA as it surged 30% on earnings, leaving some to continue working. Picked up some MU as the chips showed some resilience. Didn't want to play 'chase the bus' with other positions and will see what kind of pause/test or otherwise early next week brings. Will there be buyer's remorse? Will there by a Wiley Coyote moment when the rally realizes there are still mega issues facing the economy? Not likely, so we will look for entry points in the week to come but also keep an eye out for the edge of that cliff.

Have a great weekend!

Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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