During this recent runup of nearly 6% in equity markets over the past three weeks, there has been the occasional session where stocks needed a regroup for what has been, up to now, another inevitable move higher.
Monday was another one of those sessions.
While two-thirds of the Big Three stock indices did technically finish higher, we’ll call this one a draw, with no prejudice whatsoever to the momentum seen lately.
The Dow Jones Industrial Average rose 23 points to 12,400, and the S&P 500 was up a fraction to 1333, while the Nasdaq lost less than a point to 2789.
This is also one of those days which taxes those in our business that are charged with “reasons” for the specific performance of one solitary market session.
While varying theories about Friday’s flat session (meaning, not hugely positive) are legitimate in spirit — a move by crude oil to above $108 a barrel, the absence of end-of-quarter stimulus, the absence of any huge news in general, really — we’ve already been on record as doubting the value in divining a reason in a market already so eager to defy expectations built on fundamental economic and corporate data.
We cringe at this usage, but sometimes Mr. Market just wants to go up.
Yes, it does seem logical that oil above $108 a barrel is going to have clear ramifications for consumer demand and, ultimately, corporate profits. But the reality is that we were hearing this sort of hand-wringing about oil crossing $100 at the end of February.
And had you gone all-in at that point (pre-earthquake/tsunami), you’d still have made a profit by today.
A momentum-based rally remains the default mode, and nothing in Monday’s trading puts much doubt into the notion — particularly not another 0.4% gain in the Russell 2000 small-cap index, which speaks well of the speculative mood.
Indeed, what didn’t perform well on Monday? Try large-cap tech stocks, and one company you may have heard of, Apple (NASDAQ:AAPL), was off 1%. In fact, the stock has now retreated about 3.6% from an intraday high set March 28 — one week ago.
What’s more, a look at a three-month chart shows Apple notching a series of lower highs, a technically bearish pattern. Is it possible this tech mega-cap is suggesting the short-term rally’s end is near?
It’s difficult to bet against current momentum, but betting against Apple’s mathematical influence on the major indices may also prove foolish.
