Market Alert - The Close

Finally some liftoff from the NYSE large caps. SP500 showed signs of life as it edged past the May highs, then Wednesday it broke through on a good shot of rising, above average volume. I renewed my 'call' for them to rally as NASDAQ and SOX did after I said it was time for them to rally. They didn't listen the first time. Wednesday they moved.

DJ30 showed no signs of life, or at least serious ones, but then Wednesday it received a lot of help from BA as some of its non-tech components finally stood and delivered. Okay, a few of them. A lot of low volume rises as well, but you take what is given.

SP400 had lagged its growth brethren, but Wednesday it took broke cleanly higher, now looking at the January all-time high.

As for NASDAQ, SOX, and RUTX, it was more of the usual. RUTX put in its third straight new all-time high. NASDAQ its third straight new high and second straight all-time high. No new highs for SOX, but it has helped lead this move higher and is staring at an all-time high of its own.

SP500 23.55, 0.86%
NASDAQ 51.38, 0.67%
DJ30 346.41, 1.40%
SP400 0.77%
RUTX 0.68%
SOX 0.66%
NASDAQ 100 0.60%

VOLUME: NYSE +14%; NASDAQ +7%. Solid above average volume for both exchanges. Finally some good volume across the board.

ADVANCE/DECLINE: NYSE +1.8:1, NASDAQ +1.5:1. Alas, still crappy breadth.


It was the long-awaited day where the NYSE large cap indices joined in the upside in earnest. Volume was up and stocks broke higher. These large caps, outside of a few, have not rallied much, so there is upside potential in these even as NASDAQ and company have put in 5 upside sessions out of 6.

Indeed, it would not be too surprising to see NASDAQ and SOX take a breather while SP500 and DJ30 catch up a bit. RUTX? Who knows with that index; it is in its own zone. It does indicate that despite all the talk about how the trade issues are going to hit the economy and have 'cost' the market $1T, the economy is not bad, not bad at all.

So, on the day we basically let the plethora of good positions we already picked up continue to move higher. We are looking at some industrial types if the money seriously moves their way (trade was still low -- want to see the trade on these stocks jump to show real buying). Volume can definitely move their way thanks to rotation. Thus, we are watching for stocks such as HON, CAT, UTX, DE (started a bit Wednesday) to kick to the upside.

BA was a big driver upside but it was not alone. HD continued upside. V drove higher 4%. CAT 2.29%. Some good moves starting, and another 3% to 5% on them is not crazy talk.

NEWS ANYONE?

Surely some news story drove this. Sure, go ahead and believe that. The skinny was China and US trade tensions lessened and that green-lighted the upside. China proposed something, the US proposed something -- not as bitter as we were led to believe. Surely all is well. Buy industrials.

No, it is not the end of trade hostilities. This is the Trump template where he swings from friendly to hostile in a random way. It keeps the other side off balance and guessing, and that wears them down. Hostilities will resume. Count on it. The market, however, is doing a better job of handling them even if the hand-wringers are claiming the trade retooling has 'cost' the markets $1T.

Speaking of trade, the April balance fell and March was revised lower.

April Trade imbalance: -$42.6B vs -48.4B vs -47.2B (from -49.0B)
Oil prices spiked, usually a big drover of the imbalance, but even with that factor the imbalance was less of an imbalance. Is the Trump tactic working? That doesn't look like a 'cost.'

ECB: The ECB was worth a laugh or snort this morning as some of its 'officials' said the next meeting would be 'live,' i.e. that they would possibly consider someday doing something about ending QE. Good luck with that.

Jobs: Supposedly the JOLTS shows there are more job openings (6.7M) than unemployed workers (6.1M). Jobs for everyone! Of course that is a bogus number. A record 95.9M working aged people are not in the labor force as of May, an all-time record. It still pays to be 'disabled' as some otherwise healthy individuals are labeled. Roughly 318M total people in the US, 95.9M working aged not working, or 30% of the entire population. These are not retirees -- these are working aged people, those up to 65. If half of those were in the workforce working, man things would be hot. But, we have made it easy to not work if you don't want to. And so we pay for a lot of people who likely should be working. Just saying.

In sum, there was not a lot of market moving news. Stocks were up and just stayed up. I was concerned about a higher open with futures fading toward the bell. That is not a good setup. Stocks handled it well, however. After a drop in the first half hour from that rapidly diminishing pre-market upside, stocks bottomed, bounced, and rallied beautifully into the close. Impressive.

We did not pick up a lot of new positions as noted. We already have a lot of good positions though some now and then hit us such as BIDU or today YY. BIDU is rebounding decently and we will see if YY can. Those gaps don't give much to work with.

Outside of those, however, we have a series of excellent positions that are moving higher and making us money. We banked some BA today but let most positions continue higher. As long as the market runs, we will let part of them run.

As for new positions, we are not done buying, but will have to shift back to some of the SP500, DJ30 type stocks. We have CAT, HON, and BA, and have waited for them to make good on good patterns. Tried once and didn't hold, but the patterns are even better now and they are stirring.

That means we are letting positions work and also watching for some rotation that we can use to pick up more positions that can make us money. Didn't get the retailers, or at least not as many as we wanted, but we will still look for other areas turning that corner.

Have a great evening!
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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