"Successful trading is about finding the rules that work and then sticking to those rules." — William O'Neil
Positive economic data gave a kick in the right direction to equity markets, allowing the S&P 500 and Dow Jones Industrial average to close again at all-time highs. The day was owned by the bulls with just a few pullbacks, but still the gains were not felt by everyone, with more stocks declining than advancing.
The cyclicals moved back to the top of the sector list as investors were motivated by positive import/export data and crude oil inventories. The data provided a good reason for investors to rotate back into the cyclical sectors after chasing gains in big tech over the past few weeks.
Bigger than expected inflation didn’t hold back the markets from setting new records today. The S&P 500 set another new record close while the Nasdaq inches toward key support levels. The gains were driven mostly by large mega-caps and not shared broadly across the indexes.
After several days of big gains, its ok for the markets to take a pause. Morning selling turned into buying as treasury auctions showed little trouble and yields remained under control. But the confidence wasn’t enough to hold the indexes near intraday highs as investors turned their attention to inflation data becoming available Tuesday morning.
The story of the week was the strength of big tech as the four largest mega-caps broke out of bases and drove indexes and their respective sectors higher. The week also saw a breakout of growth stocks relative to value stocks after a few months of rotation. It’s still yet to be determined if the trends will stick, but the charts show a positive trend.
The S&P 500 was dominated by three growth sectors for the week, finishing the week with a big 2.71% gain and another new all-time high.
The morning producer price index numbers are a great sign for the economy as demand increases in manufactured goods indicates consumer demand. It’s not a great sign if you are worried about inflation . The markets opened with a dip on the news, but quickly recovered as the dollar pulled back from the morning reaction to the news.
Investors shook off early nervousness over higher jobless claims and bulls led the markets rally throughout the day. Treasury yields, the US Dollar and commodity prices all supported Technology as the leading sector of the day, carrying the Nasdaq to the leading index of the day.
It was a choppy side-ways session today for most of the market. The small caps suffered compared to the larger caps while mid-cap growth stocks had mixed results. Overall, investor sentiment remained cautious without many big reactions to economic news.
There was caution in the market on Tuesday after several days of record setting gains. Investors are monitoring the progress of infrastructure plans and the potential for new taxes. At the same time, the pandemic keeps popping up new fears as Canada declares a very serious third wave.
