The Week That Was, The Most Hated Rally Continues

The week that was saw choppy action. The S&P 500 rose 0.05%. Monday was lower then Tuesday was higher. Wednesday was the worst day of the week dropping -0.29%. Thursday was the best day gaining 0.47%. Friday was lower.

The last time the S&P 500 move greater than +/-1% was on July 8th. As such, we are setting up for another such move. There have been 37 such days in 2016 but only one in July and none so far this month. Oh where oh where did volatility go?

Winners for the week were Conglomerates rising 3.3% and Services up 1.3%. Healthcare fell -08% for the week.

For the week stock indexes were mixed across the board. The S&P 500 rose 0.05%. The Russell 2000 fell -0.12%.

Each week I track the spread between stocks with a strong technical rank and those with a poor technical rank. Stocks with strong relative strength rose on average rose 1.34% and those with a weak relative strength rose at a slower rate 0.96%. The conclusion is that investors are not selling recent winners but letting them run. Moreover, buying weakness worked this past week and trying to short them did not.

Intraday action was all over the place this past week. Our confidence score on the intraday action was 51% after a strong week last week of 56%. The range is typically between 10% and 90%. On a intraday basis the Dow, S&P 500 and Russell 2000 have been higher for eight consecutive weeks. Pretty impressive.

For the month sectors in the red are Utilities, Energy and Materials. For the past three and six months, no sectors are lower.

The big worry for this week is whether profit taking take place as traditionally August is a tough month for stocks. So far, so good.

The week ahead sees economic data released for CPI, housing starts, industrial production, FOMC Minutes, leading indicator and Philadelphia Federal Reserve Manufacturing along with several weekly data releases like crude and natural gas inventories, jobless claims and mortgage applications.

Treasuries led by TLT rose 1.51%. Corporates led by LQD rose 1.06% while high yield led by HYG rose 0.90%.

Emerging markets (EEM) rose by 2.35% last week. Meanwhile, Europe (EFA) motored higher by 1.82%. China (FXI) also moved higher by 3.28%.

Conclusion: Investors continue to bid stocks higher especially outside the U.S. Failure to move above 2200 could bring 2100 into play.  The bottom line is the stock market is in the midst of the most hated rally in the history of the stock market where investors and professionals are both under invested as the fear of a repeat of 2007-2009 along with the upcoming election  has created a great deal of anxiety.

The stock market is in the midst of a “Buzz Lightyear Rally”, to infinity and beyond. Meanwhile, we remain with a bullish bias and are enjoying this move without much anxiety.

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