The morning gap higher was looking quite promising for this market. French elections, or at least the first round had passed and the world did not end. Funny. While the gains were solid this market is far less impressive when you peek behind the curtain. Today’s action felt more like short covering laggards than anything else. Financials led the market higher moving 2.25% as a sector. The group had been hit hard after the last Fed meeting and earnings. The Russell 2000 is struggling and continues to lag whereby the NASDAQ 100 keeps chugging along. They are the new blue chips. Not inspiring action and we have some work to do with our stops. We were plenty long headed into the day and came away largely unimpressed.
It is quite clear the NASDAQ 100 are the new blue chip stocks. AMZN, GOOGL, FB, AAPL, etc. Given the potential these firms have with new technologies such as AI provide them with leverage most cannot compete with. How many other companies can test out Virtual Reality like FB can? Sure, GOOGL might. Not too many without venture funding can make the type of investments these conglomerates can. It gives them an edge. Institutions are flocking to them as they are providing haven when all else fails. It is quite impressive to see. It is not our strategy to blindly jump in a mega cap stock. We tend to fish for something smaller and faster. We want big gains rather than slow moving stocks.
This is the final week of April. Next week we have another Federal Reserve meeting. Will they indicate a rate hike is nearing? I am sure they will want to keep the option open, but give the last jobs report the economy simply isn’t where it needs to be. Odds still say for a September hike, but that will certainly move next week.
Another curious thing about this market is the VIX. The VIX closed with a 10 handle today. Not too often you see the VIX sub-11. It does make it hard to fathom much upside from here with the VIX at 10.84. UVXY and VIXY look to be viable options soon and we’ll be looking for the opportunity to perhaps reestablish our hedge. Time will tell, but an opportunity may present itself relatively shortly.
We can’t complain about gains, but a shame we couldn’t have a better showing. Always cut your losses and have a great week!
