The S&P 500 cruised to a fifth consecutive all-time high Wednesday after starting the day on a down-tick. Group rotation brought technology and materials stocks back to the day’s leadership. Industrial metals rose following a wider-than-expected trade surplus. Energy, utilities and consumer discretionary stocks were flat to lower.
There were few domestic economic reports, but across the pond, Germany reported strong industrial production. And in Asia, markets rallied on stronger-than-expected Chinese trade data.
At the close, the Dow Jones Industrial Average was up 49 points to 15,105, the S&P 500 rose 7 points to 1,633, and the Nasdaq was up 17 points at 3,413. The NYSE traded 730 million shares and the Nasdaq crossed 397 million. Advancers led decliners on the Big Board by 2.2-to-1, and on the Nasdaq, advancers led by 1.4-to-1.
Most sectors and indices have broken to new highs. On Monday, we had a new Dow Theory buy signal as both the Dow industrials and transports broke to new highs. Even the small-cap and midcap stocks have broken out as buyers seek bargains in every sector and index.
Even though prices have accelerated and broken through the tops of channels, note that the internal indicators are not yet overbought. RSI on both the S&P 400 and the Russell 2000 are in the upper half of their range. But neither is overbought, and both are in a MACD bullish zone.
Conclusion: The buying has broadened into the small-cap and midcap stocks while the blue chips and broad-based indices continue to flourish. With almost all groups and sectors now participating, don’t look for a meaningful correction anytime soon.
Most indices have broken into uncharted territory, and that means that the only sellers are traders, who provide slightly lower prices for more buyers waiting to jump on shallow declines.
Significant distribution will likely be delayed until price/earnings (P/E) ratios advance to overbought levels, and with the S&P 500 at about 14.42 times this year’s estimated earnings and an average dividend yield of over 2%, pullbacks should continue to be shallow.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.