Plunge in Treasuries Fuels Stock Market Surge
Stocks surged and closed strong with small-caps leading the charge. All of the major index ETFs were up, but the Nasdaq 100 ETF (QQQ) and Nasdaq 100 Equal-Weight ETF (QQEW) lagged with relatively small gains (less than .50%). Apple was down sharply and weighed on QQQ. Relative strength in small-caps is positive though and the IWM:SPY ratio has been moving higher the last two weeks. All sectors were up with financials leading the charge. Homebuilders and Retailers were also strong as the Home Construction iShares (ITB) and Retail SPDR (XRT) hit new highs. Stocks were fueled by a plunge in Treasuries as money rotated out of relative safety and into relative risk. Weakness in the 20+ Year T-Bond ETF (TLT) indicates that the bond market is becoming more positive on the economy and employment picture. The Dollar also moved higher as the Euro Currency Trust (FXE) held its support break at 129.
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Key Reports and Events (all times Eastern):
Wed - May 15 - 07:00 - MBA Mortgage Index
Wed - May 15 - 08:30 - Producer Price Index (PPI)
Wed - May 15 - 08:30 - Empire Manufacturing
Wed - May 15 - 09:15 - Industrial Production
Wed - May 15 - 10:30 - Oil Inventories
Thu - May 16 - 08:30 - Jobless Claims
Thu - May 16 - 08:30 - Consumer Price Index (CPI)
Thu - May 16 - 08:30 - Housing Starts/Building Permits
Thu - May 16 - 10:00 - Philadelphia Fed
Thu - May 16 - 10:30 - Natural Gas Inventories
Fri - May 17 - 09:55 - Michigan Sentiment
Fri - May 17 - 10:00 - Leading Indicators
Charts of Interest: Tuesday and Thursday
This commentary and charts-of-interest are designed to stimulate thinking. This analysis is
not a recommendation to buy, sell, hold or sell short any security (stock ETF or otherwise).
We all need to think for ourselves when it comes to trading our own accounts. First, it is
the only way to really learn. Second, we are the only ones responsible for our decisions.
Think of these charts as food for further analysis. Before making a trade, it is important
to have a plan. Plan the trade and trade the plan. Among other things, this includes setting
a trigger level, a target area and a stop-loss level. It is also important to plan for three
possible price movements: advance, decline or sideways. Have a plan for all three scenarios
BEFORE making the trade. Consider possible holding times. And finally, look at overall market
conditions and sector/industry performance.
