Wednesday, April 02, 2014

The Uptrend Resumes

Lately we had raised the caution flag about stocks due to the action in leading stocks and how most looked to be entering into corrections.  But you have to respect the price action, and yesterday the S&P 500 closed at a new high.  This morning we are seeing some follow through, and the S&P 400 midcap index is also at new highs.

In economic news, the ADP Employment report showed the private sector added 191,000 jobs in March.  That was slightly below expectations but still a solid overall number and above February's revised figure of 178k.  We will have to see how well it correlates to Friday's govt payrolls report.

Bond yields are moving higher on the employment report with the 10-year yield back to 2.80%.  That's nearly a 1-month high in yields, and if you look at the chart of the 10-year the pattern projects higher yields in the near-term.

Asian markets ended higher overnight.  According to Shanghai Security News, some smaller Chinese cities are debating lifting certain property curbs in order to prevent a downturn in housing.  This is another risk to the Chinese economy-- trying to slowly let the air out of a huge property bubble.  But history doesn't bode well for successful soft landings when bubbles burst.

European markets are mixed today.  Eurozone GDP was revised down to 0.2% from 0.3%.  The IMF's Lagarde said the ECB needs to provide more monetary easing.  The ECB will release its latest statement tomorrow morning.

Oil prices are lower near $99 while gold prices are higher today around $1291.

Trading comment: While most of the excess cash we have been investing of late has gone into alternative funds and more defensive investments, the breakout to new highs in the SPX has caught our attention.  We will be looking for new areas of leadership in the market.  One area that seems to be leading the early action is the transports, as the IYT breaks to new highs.


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