A better than expected Empire Manufacturing index was a positive for the market in the early going. However, weaker than expected retail sales gave the market some pause. Despite the mixed economic readings the market was able to push higher on the day even without volume. Buyers were simply willing to bid up the market and there weren’t enough sellers to push price lower. Demand outstripped supply. Russell 2000 and NASDAQ continue to push higher driving their relative strength higher closing the day positive on both indexes for the 8th straight day. Volume or not, this market continues to push back bears and rewarding bulls along with those who are on the trend.
Leading the markets higher were Utilities followed by technology stocks. Utilities have been beaten up since the rise in rates starting in May, but they are trying to battle back. XLU’s current yield of 3.77% certainly beats the overall SPX yield of 2.05%, but also higher than the current UST 10 year and 30 year yield (2.54% / 3.60). XLK moved back towards its highs set in May, albeit on light trade. The ETF is wedging higher, but in this QE/ZIRP environment a low volume wedge rally is to be expected.
On the other hand we had the homebuilding stocks take a step back today. ITB looks incredibly bearish. PHM, RYL, and LEN all look to be rolling over failing to get a bid. Perhaps the large jump in rates has really squashed buyers’ appetite to get out and buy real estate. Judging by the price action it appears homebuilders will resolve this price action to the downside.
The last time the S&P 500 ended an 8 day winning streak (according to Business Insider) was in November of 2004. The market continued higher into year-end after the win streak. Does this mean we’ll continue to push higher into August? Sadly, it really means nothing. Given the current trend it is easy to assume we’ll continue this rally, but not because we had 8 straight days worth of gains. We’ll be on the look out for distribution/stalling action in the market. Until then, we’ll continue to plug away at this market as time moves on. There is no sense in trying to call a top or guess if we have hit one. Stick with the trend by riding your winners and cutting your losers.
