Marketview: A More Ambitious Top

Relatively quiet week with the exception of the emotional industrial complex raging in Twitter and Stocktwits.  We pulled back ~3% off the absolute highs, but you would have thought we were down 10% from the tone.  It seems that sentiment has become very easy to shift lately.  Not sure what that means for the market overall, but I definitely noticed it this week.

The big economic data point that I watched for this was GDP.  It’s very clear now why the FED took such aggressive action with QE3.  Next week we’ve got a big Nonfarm payroll report (aren’t they all) and the reaction to the report should give us some visibility as to whether the uptrend can last.

What everyone is really worried about is getting caught in a repeat of these shaded areas:

 

Sector rotation this week was predictably skewed towards the safety trade with utilities, healthcare and consumer staples leading.  Weakness in $AAPL forced tech into the shamed weakest sector, followed by basic materials and consumer discretionary.  What’s interesting to note is the large split happening in large-cap tech.  $GOOG, $IBM, and $CSCO led the $OEXwhile $AAPL, $DELL and $ORCL lagged.

Will we stumble into another murder-hole or is the market looking to put in a more ambitious top?  The hate towards this market is well documented and there are ample reasons to distrust it.  While I have personally developed a certain distaste for the S&P at these levels, I only can see small cracks in the bull thesis — no real ruptures yet.  Plus, this bull market is full of swagger; it spits in the face of data and reason on the way up.

All quantitative metrics are still pointing higher, but if any of them so much as hiccup I will update my posture.

Winners: $GOOG, $IBM, $CSCO, $AMGN, $MRK, $WAG, $CVS, $FDX, $SO

Losers: $CAT, $HAL, $DD, $DOW, $C, $BAC, $AAPL, $DELL

Watch for early directional cues next week.  Nonfarm payroll weeks are overwhelmingly trending and if we don’t rally by Tuesday we might be in for some volatility.

 

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