As noted by technical observers, several of the major benchmark indices knifed to six consecutive intraday record highs, and the Dow Jones Industrial Average crept to its seventh consecutive record close. That is the first time that this has occurred since 1987, and the longest winning streak for the Nasdaq since 1999.
Some thought that Friday’s early round of profit-taking was the beginning of a consolidation. But a high-volume rally that began in the final hour put to rest most feelings of dread. (See the Nasdaq 30-second bar chart, below.)
Chairwoman of the Federal Reserve, Janet Yellen, had a most cogent answer as to why the stock market has had a record run-up: “Growth,” she said “is reasonably good.” She went on to explain, “I think market participants likely are anticipating shifts in fiscal policy that will stimulate growth and perhaps raise earnings.”
Rather than anticipating a move by the Fed that would put the brakes on market growth, Ms. Yellen’s comments were interpreted as bullish for stocks.
Thus, Friday’s gains by the Dow Jones industrials, the S&P 500 and the Nasdaq of about 1.5% were interpreted as anticipated benefits of tax cuts, regulatory easing and increased government spending (see Chart Of The Day).
At Friday’s close the Dow Jones Industrial Average gained 4 points at 20,624, the S&P 500 gained 4 points, rising to 2,351, the Nasdaq closed at 5,839 for a gain of 24 points, and the Russell 2000 closed at 1,400, up one point. The NYSE’s primary exchange traded 945 million shares with total volume of 3.5 billion shares, and the Nasdaq crossed 1.9 billion shares. On the Big Board, decliners outpaced advancers by 1.2-to-1, and on the Nasdaq, advancers led by 1.3-to-1. Blocks on the NYSE increased to 7,070 from 6,456 on Thursday.
For the week: The DJIA rose 1.75%, the S&P 500 gained 1.51%, the Nasdaq rose 1.82%, and the Russell 2000 gained 0.79%.
A new intraday high was established by the Dow Jones on Thursday at 20,640. This puts the Dow Jones industrials as a leader and within range of another round number at 21,000. Support now rests at 20,125.
Conclusion: While Mr. Market gains strength from block institutional buying, the public has become more reluctant to participate. The latest AAII numbers indicate a drop in the bullish reading of 2.7% at 33.1% and an increase in the Bearish number to 32.45%, up 4.7%. Historical averages show Bullish at 38.5% and Bearish at 30.5%. Thus, even though the market is accumulating high-volume buyers, the public is becoming more reluctant to participate than on average.
It is a truism that no one system or method has proven 100% reliable. However, when combined with both technical analysis and strong fundamental expectations, being a bear this year has thus far been a losing position.
Today’s Trading Landscape (Heading 3)
To see a list of the companies reporting earnings today, click here. (regular Paragraph text)
For a list of this week’s economic reports due out, click here. (regular Paragraph text)
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