On Friday, blue-chip stocks led by the Dow 30 lagged the more aggressive indices for most of the morning. But the Dow was revived in the last few minutes of trading, taking the senior index to another new closing high.
The Nasdaq, led by biotech stocks, rose 0.8% to the highest close since November 2000. Chip stocks continued to surge as demonstrated by the success of the iShares PHLX SOX Semiconductor Sector (NASDAQ:SOXX), which rose 0.9%. And homebuilders provided support, as well, with the Homebuilders SPDR (NYSE:XHB) up 1.4%.
At Friday’s close, the Dow Jones Industrial Average was up 36 points to 15,118, the S&P 500 rose 7 points to 1,634, and the Nasdaq popped 27 points to 3,437. The NYSE traded 630 million shares and the Nasdaq crossed 384 million. On the Big Board, advancers beat decliners by 1.5-to-1, and on the Nasdaq, advancers were ahead by over 2-to-1.
For the week, the Dow gained 1%, the S&P 500 was up 1.2%, and the Nasdaq rose 1.7%.
On Friday, the PowerShares DB US Dollar Index (NYSE:UUP) broke higher on a continuation gap. The U.S. dollar rose against a basket of currencies, confirming that the quadruple-bottom that was formed from September to February and the golden cross on April 3 were solid bullish signals that indicate a major change in trend.
The semiconductor stocks, as illustrated by the SOXX, have advanced for seven straight days as the power of a breakout from a major cup-and-handle formation has drawn in buyers.
This group of stocks has lagged the advance of the major indices for months, but has finally received the attention that it deserves since there are many beneficiaries of the smartphone evolution in the group. (See Friday’s SOXX long-term chart.)
Friday’s close at the high of the day tends to support a continuation of the current advance for the S&P 500. Initial support is at the low of the last three sessions. Then the April high at 1,597, the 20-day moving average at 1,589, and the 50-day at 1,570 provide in-depth support.
Conclusion: On Friday, the bulls reversed Thursday’s S&P Fed fright by erasing that loss and closing at a new all-time high. At the same time, the U.S. dollar pushed higher sending oil and metals lower, which is another strong positive for continued economic expansion. And the previously lagging semiconductor group (SOXX) continued its explosive advance from a cup-and-handle formation that could easily push the index to $68 or higher.
Despite some short-term concerns due to overbought internal indicators, any declines should be limited to the S&P 500’s support lines as listed above. But profit-taking that drives stocks to those levels should be viewed as buying opportunities since the internal power of the bull leads me to believe that a target of 1,700 by late June/early July is attainable.
What tape action could lead to short-term pullback? The following would cause concern: a “key reversal day” (see Friday’s Daily Market Outlook), three straight days down in the Dow industrials (has not occurred yet this year), and/or a high-volume break with volume of 5 times down.
You have to give The Wall Street Journal credit for tenacity. Their article in the Weekend Journal, “Fed Maps Exit From Stimulus,” is probably the piece that was rumored on Thursday and caused a minor sell-off.
Today, we’ll see if the story has any impact on the market. My thought is that if the Fed is not doing contingency planning to unwind their $85-billion-a-month bond-buying program, every governor should be fired. The question is when will they start such a plan, and the Journal’s writer admits to not having a clue.
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.