Our uptrend continues with solid price gains and with leading quality stocks at the helm. Volume slide as institutions appeared to hold back in front of earnings. The S&P 500 tested 1100 a few times, but sellers were able to hold the index below the “special” 1100. Over on the NASDAQ the index was weak due to Microsoft and Amgen weighing down the index. In the end, all of the major indexes finished the day in the green with good price gains and at 52 week highs.
It was clear institutions were waiting for earnings out of Apple and Texas Instruments. The fear of a gap down after a terrible earnings report or guiding lower than analyst estimates is woven deep into money managers. I can see the fear, we have a shaky recovery driven by liquidity pumped into this market by the Federal Reserve. Last week we saw a mixed bag of earnings and coming into this week money managers were simply being cautious. Both Apple and Texas Instruments knocked the cover off the ball and guided higher than the street. Apple especially blowing out earnings and revenues as sales from iMac and the iPhone was much higher than analysts expected. The consumer isn’t dead, but will go after speciality items they can not be without. Positive news will help ease the fear of bad earnings surprises.
Once again our top callers and short sellers were proven wrong once again today. Just because the market moves higher doesn’t mean it HAS to come back in. At some point we’ll break through the 50dma and find our way to the 200dma. At this point in time we simply do not have the signals that would cause us to believe we will pull back. We have too many leading quality growth stocks moving out of consolidation with volume. Remember, this is a liquidity driven market and not a fundamental move. Therefore, we are going to see awkward bases and price action. We have already witnessed a few stocks breakout of short bases and loose price patterns. Simply put, liquidity driven markets create wide and loose patterns.
This market should be able to build upon its gains and not look back. If leadership begins to stall out it would signal we might be on the verge of heading lower. At this point, we don’t have this situation. It is always good to know the signs of a market turn rather than be caught off guard when a turn may happen. Watching your gains evaporate when you could have saved yourself if you had been paying attention.
Keep your head up, losses short, and focus on the leaders.
