The market was dealt with a disappointing reading regarding GDP growth in the first quarter for the United States. If it weren’t for the mandated spending of Obamacare growth would have been negative. Better-than-expected personal consumption was nice to see. Yellen and the FOMC decided to continue with the Taper despite the dismal reading on first quarter growth. For now the market doesn’t appear to mind the fact it is getting less and less free money. In the end, it is still getting free money. We are still waiting for the valuable follow-through day despite it being day number eleven. The positive on the day was the Dow closed at an all-time high. There is nothing bearish about all-time highs, right?
Volume jumped higher today due to end-of-the-month rebalancing. Prior to the last 10 minutes of trading volume was trending lower on the session. It is not the norm for a FOMC day to see volume lag over the prior day. When we look back it will appear volume flooded in at the close, but the bigger question was it new demand for stock? We know in time price will answer this question and it is something we’ll certainly listen to.
The top two sectors contributing gains to the S&P 500 were basic materials up .85% and industrials up .71%. Oil and gas brought up the rear closing lower by three basis points. Nothing to write home about, but it does beg the question why is the money flooding to basic materials and industrials? We are following the price action and typically big moves aren’t made by stocks belonging to these groups. Neither sector screams innovation nor growth, but perhaps there is more to this story than meets the eye. All we can do is follow along with what our price signals are telling us. For now, it is all about these sectors.
Now we get to deal with Sell-in-May garbage from CNBC and other pundits. It is true, historically selling sometime in May and coming back in October is a profitable adventure. However, there is money to be made on the short and long side of the market. While conditions may not be ripe for gigantic market moves we can still profit from what the market gives us.
This market can and will be a grind at times. It is best to stick with the plan and constantly adapt. Now we get to look forward to the Jobs report on Friday taking us into the weekend! See you back here again tomorrow.
