No big downside follow through, another late day buying, VIX down again. (underlying bid prevails again ~898-900). These kinds of end of day market commentary ought to be familiar with us by now. When we breached SPX 900, it was kind of a quiet moment where people wanted to see if it's going to open a flood gate and sellers drive this market down to SPX 890 range. Perhaps, in a day or two, we'd be able to see SPX 875 and the inevitable pullback will be done with. Unfortunately for many, markets behaviour is hardly conventional for awhile now. Banks- Brokers, still resilient and absorbed enough that short covering took place in the afternoon before abating into the close. Not surprising here, the absorption of capital raising (near $40B in a week) was the blame game for their weakness today.
Well, to sum up, today, we had another disappointing follow through from a Bear's perspective as selling was contained . Since April, we just haven't had "back to back" nasty down days. Today, it's no exception. There's really no real news to pinpoint yesterday's drop nor today's afternoon buying. In other words, it's just consolidation within this bull run with profit taking/ short covering taking it's course. Whether this is a bull market rally or a bear market rally, we don't really care at this point. All we know is, it just feels like there's still quite a bit of upside left in this run. Sure, we still need some positive news/catalyst from economic or corporate front to power this rally further. From what we've seen the last few weeks, market has been getting just that. Yesterday, we alluded to tech analyst meeting/ conferences upcoming and AMC, we had headlines from INTC's CEO saying the quarter is going slightly better than expected, thus raising guidance. This is just what market wants and needs to hear, especially the techs which we noted last week as a concern. Today's 30+ confirmed this, hopefully more positive noise like INTC (IBM goes Wed.)
We have many recent earning plays in consolidation mode these days. Some like NEU, PEGA, ICE may look like they are done consolidating while others are coming around slowly. In either case, we just don't have a shortage of possible sector and / or individual plays these days. Whether we are buying setups that are on a verge of breakouts, or setups that are on good pullbacks, or throw in a sector move like Agri. today (*Crop data report), this is a perfect bull trend, still! What we are hoping for is that this market can spend a little longer consolidating. At this point, it's not that important whether we hit SPX 890 or 875 as the potential low, we just want this market to trend up in a healthy way. Last two trading days have been healthy, that's the bottom line.
Right now, the tape indicates a rotation into defensive sectors (HealthC, staples etc) and away from High beta groups eg. (Casino's /Lodging= drop today). Media is trying to harp this, including Briefingcom, doing it's best but we question rotation at this point in the game!. This is an Armageddon trade, we're beyond that!. We just need consolidation from Tech, banks- brokers, it doesn't mean a switch into defensive names!. Look at it this way, if you were a MF investor would you be calling your broker up now to switch into defensive sectors in what is most likely a start to a Bull market.?? We'd hang up on you;)
We have a Retail April sales # tomorrow morning which can potentially give this market a positive surprise. Beyond that, the current tape action is about as good as it gets.