Just shortly after another inventory build crude oil reversed higher erasing losses. The move helped push stocks higher led by the Russell 2000. Volume was higher across the board, but ended below average. Perhaps the most impressive part of this current rally is it appears small cap stocks are turning a corner and becoming a leadership group. While financials continue to struggle it was Materials and Energy leading the S&P 500 higher. Still, without financials this market may find it difficult to really move higher. Although small cap stocks appear to be strong it would be helpful to have financials cooperate. Today was a good session and while there are issues with this uptrend at least we had a positive day.
There is certainly a lot of hope oil can return to $40 a barrel. We have no clue whether or not oil will be able to have a sustained move to $40 or not. It has 20% more to rally from here to reach $40. It is truly anyone’s guess. For now, the commodity certainly has found its footing at $30. Time will tell if we can see a sustained move higher. Lots of traders are rushing to be “right” on the bottom of oil. We aren’t willing to risk our hard earned capital on a guess. We’ll let our process work for us and if oil related names show up we’ll execute. Until then, we want to stick with strength.
Earnings season is just about over with a few names still left to report. Earnings have been bad, but it is all a part of the business cycle. The notion that EVERYTHING has to continue to move higher is ridiculous. Just like home prices would continue to rise in the mid-2000s the same goes for everything. Nothing moves in a straight line. Do not get fooled.
The Fed’s Bullard is set to be on CNBC tomorrow morning. We have seen Bullard moments where his comments have propelled the market higher. Will talk of QE4 occur? We are sure ZeroHedge will cover the story. We’ll stick to price.
