Coming off a long Easter weekend and with European markets closed US stocks were able to climb higher on the session. Whether or not it was a lack of sellers or just enough buyers stocks were able to close near session highs. Leading all gainers was the NASDAQ closing higher by 64 basis points while the remainder of the indexes closed relatively inline. Given the holiday weekend and for many markets closed today’s small gains does not come as a surprise. Even with Turnaround-Tuesday tomorrow another day of gains isn’t out of the question. Volume was much lower across the board as you can imagine coming off an options expiry. All-in-all we have yet to see a confirmation for a new rally, but given the context we are on operating in any rally here will likely be mute.
During the Big Wave Trading weekend portfolio update we highlighted quite a few charts where it simply states we are at a precarious point in the markets. Trailing Twelve Month (TTM) price-to-earnings ratio on the S&P 500 is more than 17 times. It is quite a bit extended from the normal range, but what is normal? At some level interest rates are affecting earnings yields and if rates do rise we’ll likely to see the market react to the higher rates. Price will lead us down the proper path.
Another interesting tidbit with the market is the dispersion with so called “value” plays. An interesting chart is here:
We aren’t a value site by any stretch of the imaginations, but when anomalies like this show up you have to take notice. This won’t pinpoint an exact top, just another piece to the puzzle.
Another thing we have noticed is the lack of fear in the market with regards to the VIX. Option players aren’t too worried about the market falling further. It appears from the VIX many are looking for this stock market to continue its upward path. Time will tell along with price.
Tomorrow will perhaps bring in a bit more volume and some more excitement. NFLX reported earnings and continues to surge in after-hours trading. We’ll see how the stock reacts tomorrow. FB and AAPL report Wednesday and the following Wednesday we get the Federal Reserve Rate/Taper announcement. So much fun is headed our way!
