The day started with stocks trading flat to lower pre-market as a rally built on the promise of implementation of tax and regulation reforms suffered a bit of a setback. HSA nominee Flynn resigned due to allegations he discussed sanctions with Russia pre-inauguration and then lied to Vice President Pence about it. That is the media story though the other side is that he was set up by an intelligence bureaucracy that did not like his views on cutting the hundreds of billion dollar intelligence network to a more manageable, accountable, and efficient size. Beyond Flynn, there continues to be delay in approving Trump nominees, thus delaying action. One of my favorites, Labor Secretary nominee Puzder withdrew due to weak-kneed 'republican' opposition. If you take a stand on anything these days or actually speak unvarnished facts, you are too controversial to be in government. Thus we get the schmucks we get and then wonder why things are so screwed up. But, as usual, I digress.
The point: delays in nominations make it harder and harder to get anything accomplished in the first 100 days, and that is the opposition's exact plan. Fight everything, everyone, every second. As such, questions arise as to whether promised or announced policies ever become law.
So, stocks started a bit weak. From the open, however, stocks started upside and quickly turned positive. After a midmorning breather, stocks rallied higher and into the close. More new highs, except for SOX; it has tested but did start back upside Wednesday.
SP500 11.67, 0.50%
NASDAQ 36.87, 0.64%
DJ30 107.45, 0.52%
SP400 0.29%
RUTX 0.54%
SOX 0.82%
VOLUME: NYSE +4%. NASDAQ +10%. Still below average volume on NYSE, but NASDAQ enjoyed a shot back above average, posting the strongest volume in two weeks. Volume looks a bit better as the rally is now 10 days old on NASDAQ, five days on SP500. Volume rallying well into a rally. I know I will get accused of finding the shadows in every sunny day, but higher volume as a rally is extended shows money flooding in -- typically late. That said, the really didn't show any signs of shirking its advance.
A/D: NYSE 1.1:1; NASDAQ 1.3:1. Another session of pathetic breadth. So, with the increase in volume you can see that more money is being thrown a fewer stocks versus a nice broad rally. Again, hate to find shadows in the sunshine, but this is also indicative of a rally that is working, but is also on borrowed time.
The news was good and not so good. Regional manufacturing sentiment soared while consumer prices spiked (0.6% overall, 0.3% core), Retail Sales slipped to 0.3% from 1.0% though ex-autos they rose 0.8%. Industrial Production and Capacity slipped. Gee, a lot like the markets: sentiment is riding high, but the reality is not keeping up. Expectations are leading higher while the hard data is not following along. That is not surprising; while business activity IS higher post-election on the belief change is coming, the policies have not been changed and thus while there is improved activity, it is not great activity.
The rising inflation, the biggest year over year core spike since 9/2008, was nonetheless viewed as positive. Hey, the Fed created some inflation just as it said it was going to do 8 years ago. Wow, it must really know what it is doing and of course if the Fed says inflation is good, it must be good. So, buy the market because of inflation. That is the biggest misconception and dangerous falsehoods of the Phillips Curve crowd, but for many, many years the wrong side of the economics theory spectrum have been in control, and they think inflation is good. So, the go between panicking and promoting inflation to then panicking and fighting inflation. So productive.
Financials continued to perform well, adding onto the Tuesday gains, but not as powerful. A group that moved big were large biotechs as CELG, BIIB, AMGN and company surged. Some metals continued nicely higher. Chips were up but still somewhat pensive after the pullback.
A good indication is that while some areas are moving up as others are not, those that did put in good gains are holding those gains while the other areas rise. That shows the more virtuous rotation where new money enters and chases new sectors while the money already invested is left where it is. That helps the market build on gains versus chasing its tail round and round.
So, while the internals and sentiment remain at levels that show low power for the former and approaching extremes for the latter, the market still rallies. New areas are still coming forth so the market continues the rally and we continue to enter plays. Today we picked up CELG, CY and tried to get OREX but got the alert late (we don't enter until the alert hits us and we are last on the list it sends to); we will look at OREX again in the morning. Took some gain on NTES ahead of earnings, but let everything else work as the market was still working. It will stall at some point but that certainly was not Wednesday.
Have a great evening!
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
______________________________________
Alert Key
http://www.investmenthouse.com/alertkey.htm
PLEASE DO NOT REPLY TO THIS EMAIL. USE THE CONTACT US PAGE ON OUR WEBSITE.
Customer Support: http://investmenthouse.com/contact_us.php
No comments:
Post a Comment