The best thing about today’s broad rally into late July’s high is it didn’t even involve a gap open, but a steady climb into the close from a flat open. We’ve talked about being invested in this market overnight due to morning gaps taking away any chance of profiting in buying an opening bell. Today was a plus as it provided a rare opportunity to simply add positions at the open and enjoy the ride. Of course, you need a game plan and today’s 'Ahead of the open' provided a pretty good one.
Firstly, cited the upbeat reports, specifically LLTC management call for the $SOX and its components. (XLNX repeated this AMC). The SOXX surged over 5% on the day, a full 2pts from open to close, which is a 4% gain on the day from an open buy. Note this 5% isn’t the beginning, noted earlier in the month…. “A switch into higher beta sectors is still evident, today we saw it in tech as well with semi’s up ~2% vs. the safety of software linked stocks”.
Now, $SOX is the leading sector YTD with housing, financials in the cyclical tow. A little extended at upcoming resistance, no?
Secondly, all the disappointment in previous day’ action was for not as speculated here. GS, ~+7%, JPM , ~5%, JPM closing .30 away from its price heading into earnings confirmed the premise of buying the dips in financials discussed all month and yesterday.….” These traders/investors are the same ones who want a dip to buy …How about just a breather?.... ”As said yesterday and now today, the pullback doesn’t take recent trade upward bias off the table. In all, consider that despite consecutive down days in financials, the market is flirting with highs not seen for months.”.
Question is how much/ how many are below the SP benchmark YTD?. Today’s action into the afternoon and close smelled of performance catch up. Closing over 1300 was a psychological barrier, not real resistance. Keep in mind, we’ll be up over 5% YTD on the SP at the trendline noted next,
“Most are underweight equities as noted previously, catch up mentality may propel market to low 1300’1315 SP, but that may be all (at the May to July down trendline),”. Jan 12
Considering the outperformance of higher beta/more cyclical sectors so far, a possible strategy to put/keep money in the market, but away from the higher beta is to stick money in ‘large caps’ going forward.