I know you’re sick of me saying take things one day at a time but like life, in markets you have to do just that. Just a week ago things were beginning to look a little ominous. The Fed did some jawboning and the markets reacted accordingly. Bonds tanked and took interest rate sensitive areas down with ‘em. The logical thinking was that other areas would follow suit. They didn’t.
Oh, what a difference a week makes. The Quack (Nasdaq) broke out of its lengthy sideways range to close at 14-year highs. The Ps (S&P 500) are a gnat’s eyelash way from all-time highs. And, the Rusty (IWM) is just two gnat’s eyelashes away from all-time highs.
The Semis, Retail, Software, Durables, Defense, Materials & Construction, Health Services, and Hardware have made new highs. Tobacco was also smoking. Some other areas such as Insurance and Drugs appear to be on their way to join them.
The Energies put in a solid day. So far, a bottom appears to remain in place both here and in the underlying commodity (we are long USO). See yesterday’s Dave Landry’s The Week In Charts for more details on this including a lengthy discussion on trading efficient markets. While you are there, join my Youtube channel to gain access to an additional 1,200+ Big Dave videos.
Gold stocks ended a little higher. Although they haven’t done much lately, I still think a bottom remains in place here. I could be wrong (I know, shocking, a “guru” admitting that he could be wrong). That’s why I have stops here and in all trades for that matter.
Is this the “all-clear?” Well, in markets you never know for sure. It does seem that we’re certainly off to a good start. Ideally, I’d like to see the Ps and Rusty break out of their range and stay there. Since markets tend to be firm going into a holiday, we could see that breakout today. We’ll just have to wait a little while for the “stay there.”
So what do we do? I have to temper my excitement for the market with the fact that sometimes there are fake outs from ranges. If it were as obvious as buying a market on a breakout then everybody would be doing it. Again, we certainly off to a good start though. Follow through will be key. Therefore, wait to see if the market can follow through before getting too excited. In the meantime, manage any leftover longs that you may have—take partial profits as offered and honor your stops. On new positions, focus on those areas that can trade independently of the indices such as the aforementioned Energy stocks. On everything else, get ready to get ready.
Best of luck with your trading today!
P.S. Unless you’re on my Trading Service you’re on your own next week. I’m going to take a break from my column/newsletter and Market In A Minute while I kick off my world tour. Meet me in Italy if you’re not too busy saving lives, building buildings, repairing automatic transmissions, or doing other great things! Speaking of my world tour, I think it’s time I visit my brethren in the UK. I’m strongly considering a stop there this summer. Let me know if you have venue ideas. I’m thinking something small and cordial for my first visit. And, then maybe we can hit the pub afterwards.
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