After the early morning news, the stock market got off to a shaky start, with the Dow dropping about 40 points and the NASDAQ Comp falling a quick 25 points. These levels turned out to be the lows of the day following our rules from yesterday’s post about buying early weakness. Well, by the end of the day, the Dow was up about 30 points leaving the NASDAQ Comp to close in the red down 6 points, Tuesday being a clear victory for the bulls.
One of the “causes” for the early morning drop happened to be the PPI which surprised the markets with a reading of up 2% for last month, on expectations of up 0.7%. Not to worry, though, as the “core” rate was only up 1.3%, on expectations of up 0.3%. The other “cause” was housing starts up more than expected. Both of these created an environment for the investors to wonder again whether the Fed would raise rates. Have they even looked at the yield curve—inverted like it has been for about a year.
As we surveyed the technical landscape, we noticed the Dow out ahead of the other indexes. With oil up on Tuesday, the oil related stocks tended to go up pushing the Dow and the SP 500 up while leaving our NASDAQ indexes behind since they have no oil stocks in them. The interesting thing is that the SP 500 was not able to break above its high set a couple of trading days ago and our NASDAQ indexes were down.
There seems to be much bullishness out there or maybe we should use the word complacency. So many people think that the market just can’t go down or it seems like every day the market is going up. Looking at just the Dow, that does actually seem to be true but this is not true when looking at other indexes.
We recommend caution out there as usual. The bull’s time is almost up.
Dow Industrials: 12,471.32 +30.05 (Yes, another new record)