Daily State of the Markets
Good morning. It is said that Ms. Market can and will do whatever it takes in order to make the largest number of people possible look foolish. In short, this was definitely the case on Monday. You see, there are any number of indicators suggesting that the bulls are due to take a break. There are the A/D and New High divergences. There is the splintered action between the leaders and the blue chips. There is the overbought condition. There is the over exuberant investor sentiment. All of which traditionally lead to a pullback in the stock market. Heck, I even went so far as to suggest that it just might be time for the bulls to finally take a break from their relentless march higher in the title of yesterday's morning missive.
So, given that just about everybody has been looking for a pullback to retest the all-important 1260 level on the S&P 500, what did Ms. Market decide to do? Yep, you guessed it; rally the Dow to its highest level in more than two years - what else would you expect, right?
Apparently rejuvenated from the weekend and armed with some fresh M&A news, some positive earnings, some upbeat company commentary, and a lack of negative macro news, the bulls sent anyone brave enough to have shorted stocks last week scurrying for cover on Monday. One look at the chart of the DJIA and the story becomes clear: A break? The bulls don't need no stinkin break - It's onward and upward!
With last week's leader-bashing still fresh on the minds of many traders, one might not have expected the news that an outfit named Smurfit-Stone was being bought or that Intel was raising its dividend a smidge (and buying back some stock) to get much attention. No, the way things were going last week, the bears may have laughed off a dividend increase of $0.0012 per quarter and continued to sell INTC short. But with the bulls back in the saddle, such news was viewed as corporations oozing with confidence about their businesses, the economy, and current valuations.
Instead of trepidation in front of yet another Fed meeting (which concludes Wednesday afternoon), the President's State of the Union, an avalanche of earnings reports, and a fistful of economic data (including Q4's GDP reading), it appears that we're back to the all-news-is-good-news environment that had been in place up until last Wednesday.
So, in light of the fact that our objective each morning is to identify the environment, we're going to have to say that unless the bears can relocate the mojo that they enjoyed for a brief period last week, the bulls appear to be riding high - at least as far as the DJIA is concerned. But if you insist on sticking to the idea that stocks don't go up each and every week, we'd suggest you keep an eye first on the S&P (a close above 1295 would be positive) and then the NASDAQ, Midcaps and Russelll 2000. For if the bulls are indeed back in the saddle, they are going to need these indices to follow along as some point soon.
Turning to this morning... It looks like the bears are attempting to provide a rebuttal to yesterday's romp on the back of a disappointing GDP report out of the UK and a revenue miss at JNJ.
On the Economic front... There is no economic news scheduled for release before the bell this morning. But we will get the Case-Shiller Home Price Index at 9:00 and then Consumer Confidence and FHFA House Price reports at 10:00.
Thought for the day: We wish you all the best for a productive and enjoyable day...
Here are the Pre-Market indicators we review each morning before the opening bell...
Wall Street Research Summary
Long positions in stocks mentioned: INTC, HOG
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