Trading started mixed on Wednesday, but stocks caught a midday bid and raced higher to close strong. The Nasdaq 100 ETF (QQQ) and the Russell 2000 ETF (IWM) led the way. All sectors were up with the Consumer Discretionary SPDR (XLY) leading (+1.58%). Strength in Macy's boosted the retailers and these stocks powered XLY higher. The Retail SPDR (XRT) surged over 1% and hit a new high. The Finance SPDR and Regional Bank SPDR led the market late last week. Now we have the consumer discretionary sector and retailers leading this week. It is hard to argue with strength in these groups. Yesterday's stampede could have been caused by under-invested fund managers looking at the calendar. Everyone is waiting for a pullback and there is talk of a bubble in the financial media. The stock market is not here to accommodate either and could simply continue higher the next seven weeks. With this in mind, the clock is starting to run out for fund managers wanting to put money to work before yearend. Perhaps this is why Ed Yardeni said he is leaning towards a melt-up scenario in Barron's this weekend. Yardeni is forecasting a 60% probability for irrational exuberance, 30% for a melt-up and 10% for a melt-down.
**This chart analysis is for educational purposes only, and should not
be construed as a recommendation to buy, sell or sell-short said securities**
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Key Reports and Events (all times Eastern):
Thu - Nov 14 - 08:30 - Initial Claims
Thu - Nov 14 - 08:30 - Trade Balance
Thu - Nov 14 - 10:30 - Natural Gas Inventories
Thu - Nov 14 - 11:00 - Crude Inventories
Fri - Nov 15 - 08:30 - Empire Manufacturing
Fri - Nov 15 - 09:15 - Industrial Production
Fri - Nov 15 - 09:15 - Capacity Utilization
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.
