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Market Wrap: Weakness Under the Point Gains

The market will be reported as having had a good day because of the 89 point gain on the Dow. But the story was awful: the Russells closed below yesterday’s low. The transports lead the way down. Breadth was negative with more decliners than advancers. New highs were a paltry 278- with all the new highs being healthcare, food, and utilities like LLY, MKC, and PPL and all the lows being commodities like WLT and X. The weekly charts of the SMH and the BKX are at resistance- chips and banks need to be in a bull market for the market to rally (unless the Fed thinks they don’t need to). The lowest risk, highest reward trade over an 8 week time frame remains to short strength. The jobs number should produce a bullish short term reaction and send the market higher until all the shorts are gone. A good number will of course be bullish, and a bad number will just make the market angry and it will go higher. The best buys are the defensive stocks, unless of course you get the one that doesn’t go up, like BGS. So the zero correlation among stocks in the same sector is probably bullish.

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