Well, after the kind of moves logged Wednesday, you start to wonder if possibly those opining that the market is in a blow off phase might be correct. Volume shot higher on DJ30, the strongest Dow trade since mid-2013. That kind of trade occurs only now and then, even eclipsing expiration trade. Before that, you have to go back to mid-2011 and the massive volume accompanying some heavy selling before a new FOMC QE program was announced.
Why is the Dow volume so important? Because a lot of the Dow stocks started the rally and have held the lead in the rally. As they draw more and more buyers after 5 weeks of rallying on ever increasing volume, it becomes a math equation. How much more money is on the sidelines ready to come in once the dam holding back the last naysayers bursts and they pour into the market?
On the other hand, NYSE and NASDAQ volume, showing a much broader snapshot of the market, showed solid increases (24% and 10%, respectively) but not blow off-like levels. Solid, above average volume buying as the rally pushed not just the same ringleaders, but some new areas as well, e.g. retail and telecom.
Thus, while SP500 and DJ30 show tremendous price and volume spikes on top of already solid gains, you have to look at the other areas that are just starting to move higher. Unlike a couple of weeks back, new money is once again entering, lifting all areas (almost) in a new 'no stock sector left behind' move.
SP500 29.12, 1.32%
NASDAQ 60.76, 1.14%
DJ30 297.84, 1.55%
SP400 1.18%
RUTX 0.88%
SOX 2.12%
VOLUME: NYSE +25%, NASDAQ +10%. Back above average on NYSE, a second session of above average trade on NASDAQ. Definitely some accumulation coming back in after NASDAQ suffered some distribution last week with those two downside drops.
A/D: 3.2:1 NYSE, 1.8:1 NASDAQ. Nothing extreme that is for certain. NASDAQ breadth was downright weak.
Of course not all rallied. Drug stocks were lower after Trump tweeted he was going to lower drug prices. Of course that means intervention in the mindset these days. A market and society now used to intervention by fiat hears the President is going to do something and it is assumed it will be by mandate. Perhaps something called competition will help. Trump is big on other countries paying their share. Right now the US subsidizes the rest of the world's cheaper drugs because in order to sell in those countries the socialized medicine people demand lower prices. That leaves the US paying the freight for R&D, etc. Perhaps Trump will help the free market work better, thus reducing prices for the US and eventually everyone. Competition is an amazing thing.
The market, already ginned up on the gains in the indices and key groups, received a booster shot when WDC increased its guidance nearly 50%. That turned a lot of heads and pushed them back toward tech, including semiconductors. SOX, as a result, surged near the November high. Near; not over yet. Same with NASDAQ: rallied to the late November highs but has not made the break through just yet.
Powerful move in price and volume. Decent breadth, at least on NYSE as the midcaps and small caps surged. SP500 exploded through the prior high. Solid moves, more sectors pitching in. Perhaps there is a blow off top setting up, but for now the market continues to run and we are letting our positions run and picking up new ones as they break higher from good patterns. We picked up some DDS and KSS in retail, some PKD in oil. There are others still in position to move.
Have a great evening!
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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