If you’ve been reading the headlines from the financial websites, you’ll note that markets (Nasdaq and S&P500 Index*) have been hitting new highs, and even though it’s been by some very small amounts, nevertheless they have been grinding higher to an all-time high on the 7th (7th sticks in my mind as I was wishing a granddaughter a happy birthday). New highs are a good thing as it shows there are buyers out there for stocks. Also, you may have heard that we had comments from the Fed again this week, and markets DO have a tendency to pull back when there is Fed speak.

Still, I was a tad surprised on the 8th of this month when a 1% pullback in the major indexes triggered a bunch of negative comments from pundits. Yes, the Fed is talking about beginning to taper their $120 Billion a month (!) bond purchase program which includes still purchasing $40 Billion a month of mortgage-backed bonds a month. And they are doing this while, simultaneously, the housing market is on fire all over the country. (We mean ‘on-fire’ in a good way.) Is that crazy or what? Doesn’t look to me like we need more stimulus! And, the new proposed regulations against China are a legitimate cause of concern. OK, I get that.

Yet when I heard (on the 7th) that ‘stock market futures are plummeting and it’s going to be an ugly morning’ I couldn’t help but wonder if ANYONE would take those comments seriously. Stock indexes haven’t pulled back more than 5% since last fall. If this was the long-predicted pullback, well it’s more than overdue. As I commented to my team that day- this is likely a buying opportunity — the bull market doesn’t appear to be over, and we’ll probably see more new highs.

I’m seeing comments from ‘financial commentators’ about market breadth being too narrow and flashing a potential warning because fewer S&P stocks are above their average price of the last 50 days, as the Index moves higher.

So, as of this writing (Thursday afternoon), let me note that the NYSE index, which is a much broader picture than the S&P Index which only has 500 stocks, is continuing to show strong market breadth. This tends to be an indicator of more new highs to come. Guess we’ll see what happens in the morning.

Friday morning update: Appears that 7th was indeed a buying opportunity, as markets have resumed their upward march and recovered almost all of the drop on the 7th. New highs expected.

Ron’s Market Minute — Where will the Markets Go?

We’re into the second half of this calendar year now. The crazy internal market rotations we’ve seen during this first half have been the fiercest I’ve seen in many years. And the two quarters of underperformance by technicians and relative strength managers is a rather rare statistic. As the fight continues waging growth vs. value stocks, we have hedged our bets a bit, and are owning some value along with the (apparently stronger at this time) growth holdings. Note that there are many ‘Sell triggers’ as the interest rates appear to be somewhat directionless at the moment. Only a few VERY nimble traders have been able to stay ahead of the speedy changes. It appears that stocks will continue their upward bias for now, and it may be difficult to judge which sectors will be the strongest.  Oil and energy look weak, and technology, consumer discretionary and communications look strong right now. I note that the ‘work from home’ stocks are having a rebirth. So bottom line, we see growth as the likely strongest area for the second half of the year, and perhaps continuing on for the next several years.  We’ll see. 

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk


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Ron Denk is a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Mr. Denk is also an Advisory Representative offering services through Denk Strategic Wealth Partners, a Registered Investment Advisor. Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation.

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