Consumer stocks led the market modestly higher on Friday, as a result of Citigroup (C) analysts’ upgrade of Procter & Gamble (PG) to a “buy” from a “hold.” PG rose 3.2% and pulled others along with it, including Home Depot (HD), up 1.11%. Lowe’s (LOW) gained 1.43%, and Sara Lee (SLE) gained 5.74%.
September has historically been considered one of the weakest months for the stock market, but so far, with just eight trading days to go, the Dow Jones Industrial Average (DJI) is up 3.41%. And with stocks up nine of the past 11 days, sector rotation has been strong resulting from a broad base of investors willing to take more risk despite little change in the economic situation.
At the close Friday, the Dow was up 36 points to 9,820, the S&P 500 (SPX) gained 3 points to 1,068, and the Nasdaq (NASD) rose 6 points to 2,132.
Volume was high on all major exchanges, but that was primarily the result of Friday being a quadruple witching day, i.e., options close in four major markets.
The NYSE traded 2.2 billion shares with advancers ahead of decliners by about 3-to-2. On the Nasdaq, volume totaled 1.1 billion shares with advancers just slightly ahead of decliners.
For the week, the Dow gained 2.2%, the S&P 500 rose 2.5%, and the Nasdaq gained 2.5%.
On Friday, crude oil fell 43 cents to $72.04 a barrel, and the Energy Select Sector SPDR (XLE) fell 17 cents to $55.18.
The U.S. dollar was stronger on Friday, and that sent December gold down $3.20 to $1,010.30. The PHLX Gold/Silver Index (XAU) fell $3.06 to $168.03.
What the Markets Are Saying
The pundits continue to moan about how “expensive” stocks are, and articles such as this appear in even the most-respected publications like the Wall Street Journal: “Bear Market Lurks as Dow Nears 10,000.”
But the market isn’t listening and neither are many investors. In fact, if anything, many are finally shaking free some cash to put to work in a market that they think still offers value.
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Money market fund assets are down some, but not nearly as much as I would have guessed. From January until March, total deposits in money markets averaged around $3.9 billon. During August and September, they have averaged about $3.5 billion, which is about where they were in March of 2008, just prior to a 900-point rally.
That alone isn’t predictive of anything. And neither is Investors Intelligence’s (II) Advisors Sentiment index. II is very good at measuring and comparing sentiment from a number of sources and then matching it to corresponding market history. With regard to letter writers, II’s assumption is that most of them are consistently wrong, and they are correct.
Currently, the bears are up slightly and the bulls are down slightly, and although the overall reading is somewhat bearish, i.e., overbought, it has improved over the last three weeks.
Conclusion: neutral.
How about the small investor? I use the American Association of Individual Investors’ (AAII) Sentiment Survey for a measurement of the public’s view of the market. This past week, the bulls slightly outnumbered bears after four weeks of an opposite reading. But there is just 2.14% separating them, and that is too small to give us direction.
Conclusion: Momentum is still strongly in favor of the bulls, so we will remain long. However, with nine gains in the last 11 days and the S&P 500 now almost 20% above its 200-day moving average, we should be cautious about adding new positions in U.S. stocks. However, I remain a buyer of precious metals ETFs, emerging markets ETFs and other foreign market ETFs.
Today’s Trading Landscape
Earnings to be reported include: Lennar Corp. (LEN) and Synnex Corp. (SNX).
Economic report due: Conference Board index of leading economic indicators (the consensus expects 0.7%).
Late news: Dell (DELL) to acquire Perot Systems (PER) for $3.9 billion.
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