Ignore the Naysayers Calling for a Correction

by Sam Collins | March 11, 2013 2:58 am

On Friday, stocks opened higher following the much anticipated, and much better-than-expected, non-farm payrolls report. The report showed that U.S. employers added 236,000 new jobs last month versus an expected 160,000, and the unemployment rate fell to 7.7%, the lowest since 2008.

Although the market opened higher, stocks quickly succumbed to profit-taking and spent the remainder of the day climbing back from their lows of the day. Even so, the S&P 500 closed within 1% of its October 2007 all-time high.

At Friday’s close, the Dow Jones Industrial Average was up 68 points to 14,397, the S&P 500 gained 7 points at 1,551, and the Nasdaq rose 12 points to 3,244. The NYSE traded 690 million shares and the Nasdaq crossed 367 million. Advancers led decliners on both major exchanges by 2.1-to-1.

For the week, the Dow and S&P 500 rose 2.2%, and the Nasdaq rose 2.4%. This was the best string of weekly gains in over two months.

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The S&P 500 has, in two weeks, risen from its February low and 50-day moving average to challenge the mighty March 2000 high at 1,552 (see March 1 chart[2]). On Friday, after reaching 1,552.48, it appeared to back away from the challenge, but a late rally brought it back to within striking distance of it.

This broad-market index, which is generally considered to be composed of higher-quality stocks, has, along with the Dow industrials, led the bulls’ charge.

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Last week, the Nasdaq picked up steam and barreled to a new seasonal high, leaving behind a breakaway gap at 3,200 (now support) and a strong RSI. Last week’s run on the Nasdaq broke October’s high and put an end the notion that the stock market’s run is confined only to the blue chips and better quality issues.

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Proving that the market’s amazing two-and-a-half-month performance has not been confined to the higher-quality stocks, the Russell 2000 small-cap index broke to a new all-time high for the second time in a month. 

Momentum in the small caps is extremely positive, but RSI remains a concern in that it has so far failed to follow the price level to new highs. Some technicians consider this to be a negative called a non-confirmation of the new high.

Conclusion: Last week’s broad-based run should prove to all that U.S. stocks are in a screaming bull market. Better quality stocks led the advance for several months, but the participation of midcaps and small caps makes for a broad market advance on all fronts. 

But despite the massive breakouts of virtually every major index, on Friday the naysayers bombarded the TV networks with scores of reasons why the market is subject to an immediate 5%-10% correction. They continue to focus on the low volume, and in this they take the traditional approach.

A low-volume break to new highs is not the usually accepted path to a solid breakout. However, the fuel for the advance — low interest rates and the Fed’s quantitative easing plans — are not traditional either.

Despite the fear engendered by a non-traditional breakout, investors should go with the trend, which remains decidedly bullish. Those investors who wait for volume to increase may have a long wait. By the time the public accepts the power of the bull market, the game will be in its final innings.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here[3].

For a list of this week’s economic reports due out, click here[4].

Source URL: https://investorplace.com/2013/03/daily-stock-market-news-ignore-the-naysayers-calling-for-a-correction/

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