Wednesday, April 24, 2013

Dow ends win streak; Small caps lead the market higher

The market kicked off with a very disappointing Durable Goods reading, yet the S&P 500 and NASDAQ were able to finish just above the flat line. Volume inched higher on the session with the Dow Jones Industrial Average notching a distribution day. PG and T were the two biggest losers on the Dow after disappointing earnings. Small cap stocks led the way with the Russell 2000 gaining 50 basis points on the day. The market remains in no mans land for the time being. Perhaps it is waiting on Friday’s GDP release or next week’s Federal Reserve meeting. We have rallied a bit off last week’s lows, but we’ll be looking for a strong move on volume to confirm a new uptrend. Crude oil jumped more than two points today. The move could be attributed to the release of inventories at 1030 am today. I was certainly hoping for lower prices from the commodity for the sake of middle and lower class income families. The dollar index did fall today, but the index has rebounded well off its 50 day moving average. Troubles in Euroland and Japan hell-bent on devaluing the Yen the dollar remains a safe haven. It would be nice to get a few days of consolidation to cool the jets off a bit. We are a bit overheated to the upside here. Economic data continues to be weak and we have yet to see the equity market see any negative reaction to the data. We are in QE land along with ZIRP anything is possible. However, the last few years we have seen May tend to be unkind to the market as it adjusts to poor economic conditions. The diminishing returns on QE have become noticeable given today’s Durable Goods release. Friday’s GDP report will certainly give a reading if this money printing has helped the economy grow. Stocks remain resilient and immune to a significant sell off for now. We’ll follow our rules to reap gains from this market. Cut your losses and ride the Big Wave gains!

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