At the suggestion of a reader -- but to be completely honest, more because I'm itching to begin some desperately needed vacation time -- I'll keep this morning's comments brief and to the point. It looks as if the tradable rally I expected might be more substantive than anticipated, with further upside likely. The preponderance of recent economic data, including yesterday's, continues to indicate that the economy is slowing, which meant that it was full speed ahead on the Street of Dreams.
National Association of Purchasing Managers
report, construction spending, initial jobless claims, retail and auto sales all served to reinforce the notion that rate hikes have begun to bite. The notion that
merry band may be close to the end of its tightening cycle gained further credence, and the bonds also continued to rally. (Even as several
officials cautioned about inflation concerns yesterday. What else would central bankers say?) Of course, there's still this morning's employment report, but unless there's a decline in the unemployment rate or a big jump in hourly earnings, the technical picture indicates that the bulls have regained control.
While sentiment indicators never got as bearish as I would have preferred, and we never reached the 2900 area on the
as I had expected, it looks as if an important bottom has been made. (As I had recently noted, you can't always get what you want.)
Another strong, broad-based rally was disparaged by a host of talking heads due to moderate volume, even as the overwhelming share of trading was to the upside and breadth was positive by better than 2-1. Basically, only the more defensive groups and some of the cyclicals failed to participate in yesterday's strong showing. More importantly, the Composite, the
broke their downtrend lines, with the latter two closing above their 40-week moving averages. Momentum indicators, which turned positive on Tuesday, continue to support the bullish case, and I don't think the Composite will have any difficulty piercing its 40-week moving average in the immediate future.
I had turned bullish on the broad market in March, when the so-called Old Economy stocks, which were both reasonably valued and disdained, held in the face of weakness in techland. It now appears that the market will be heading higher, with the battered tech sector providing plenty of additional thrust. The action in the financials also indicates that the bears will have to go back into hibernation for a while longer. The
Philadelphia Stock Exchange/KBW Bank index
, or BKX, took out its April double top and closed at the best level this year.
The combination of financial and tech leadership could generate quite a bit of exuberance. While I don't believe we'll see new highs on the Composite anytime soon, record levels on the
appear to be doable. Investors and traders should use any pullback to put some cash to work with a focus on the tech sector (the
Nasdaq 100 Trust
would be a quick, easy and liquid way to play it) and financials. In addition, if the market does work higher on expectations of a "soft landing," many of the retailers with solid sales trends should also come back into favor.
As for me, I'm also going to slow down through next week and shake some of the cobwebs loose. I might even help
pick up even more market share while I'm at it. We'll have some very savvy folks filling in while I'm goofing off, and I look forward to seeing what they have to say.
until June 13th.
Bill Meehan is the Chief Market Analyst for Cantor Fitzgerald, a Manhattan-based institutional trading and research firm, and writes for the Cantor
Morning News. Prior to that, he was a market analyst for Prudential Securities. At time of publication, Meehan held no position in any of the securities mentioned in this column, although holdings can change at any time. He appreciates your feedback at
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