Thursday, May 01, 2014

Getting More Constructive

The market is higher again today, and for the first time in recent memory the Nasdaq and growth stocks are leading the action.  Of course, most of them got very oversold so a bounce is expected.  The key will be to see if there is some follow through and if they can start making some higher lows.

In economic news, the ISM Index for April rose to 54.9 from 53.7.  Separately, personal incomes rose 0.5% and personal spending rose 0.9% for March.  These are solid figures and increase the odds that GDP will bounce back in Q2. 

But you sure wouldn't know it by looking at the yield on the 10-yr Treasury today.  It is down another 3 bps to 2.61%.  That's about the low of the range for the last few months, but it needs to hold again. 

Most foreign markets were closed for Labor Day, including Hong Kong, China, France, Germany, etc.  Japan was open and bounced 1.3%.  An aide to the prime minister said more easing will be in order if the impact of the recent sales tax hike continues to weigh on economic growth.

Trading comment: We continue to get incrementally more constructive on the markets recent action.  The correction is fairly long in the tooth by recent years standards and the market lately has not made new lows.  The correction was mainly in high beta growth stocks and that may be over.  The Nasdaq and mid-cap indexes are close to breaking back above their respective 50-day averages.  And the Dow and S&P 500 are pretty close to new highs.  As such, we are looking for stocks that held up the best during the recent correction and are poised to make new highs.  Those stocks usually provide good leadership in any ensuing rally.


Post a Comment

<< Home