Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Aside from last Thursday’s session, the senior indexes have been in a general sideways range for the better part of 2 weeks. Looking at the S&P 500 we see the index is trailing along the upper end of its ascending channel, kissing it almost daily now. The index has broken marginally above the highs of May and now faces the overhead resistance of the April highs.
One positive aspect last week was some life out of the small caps. Breadth has been lacking to some degree during this advance but some rotation into areas other than the large caps is a positive sign of “risk on”. You can see below the Russell 2K outperformed Friday. However, it is only at July highs, unlike the NASDAQ and S&P 500 which have progressed much farther.
In terms of market rotation, semiconductors and commodities took most of last week off, consolidating their big post Draghi “will save the world” comments….
…but industrials continued, and transports finally joined the fray.
The 10 year bond has been weak the past few weeks (finally), and is hovering near some resistance.
The market action has been concentrated in the first 30-45 minutes and last 10 minutes of most days as many participants seem to have disappeared for August. Volatility has dropped dramatically so we’ll see if any news this week wakes up the market. The nature of the next pullback will be important to monitor – another pullback of modest to severe nature, or more sideways action to consolidate last Thursday’s move. The gap at S&P 1370 still is one to be aware of.
On the docket we have FOMC minutes to be released Tuesday (2 PM), existing home sales Wednesday, new home sales Thursday, and durable goods Friday. Of those the FOMC minutes probably will be the most watched although that Fed meeting happened before the marginally better data seen the past few weeks. Flash U.S. PMI is also to be released Thursday but thus far no one seems to be paying attention to this report. Overseas we have Chinese flash PMI coming out Wednesday night, and some meetings among European heads of state Thursday and Friday i.e. France and Germany Thursday.
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Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
