A dominant theme was the post earnings moves in some big cap stocks. These stocks holding onto their gains after big post announcement moves is a very healthy sign and needed for the uptrend to resume higher. However, the Greek debt situation resurfaced and caused some short term hysteria in the last half hour of trading on Wednesday and again Friday afternoon. Clearly the market is reacting sharply to any headline risk as the choppiness continues.
Volatility as represented by the VIX came off recent excessive levels as equities rallied. But one area where volatility swings continue to be huge is oil. A major short squeeze created a big move off the bottom as the commodity traded above the 20 day moving average for the first time since its plunge began. The daily chart below shows just how wild the swings have been.
Another positive sign has been the leadership exhibited by small and mid cap stocks. The recent surge includes mid caps (MDY) making new 52 week highs. We also got an expansion of new 20 day highs that accompanied price as the index tested the upper end of the range. This expansion of highs is exactly what we want to see to help confirm an upside breakout. This was the biggest expansion of 20 day highs since the move off the mid December bottom. The A/D line has also made new highs which is a nice confirmation of breadth.
We'll continue to watch the macro forces battle it out and see how the market interprets Friday's jobs data over the next week. The strength in financials (KRE, KBE, XLF) can be attributed to rates ticking higher. Are we finally going to see rates steadily rise? Only time will tell but we'll be watching the financials for clues.
Here are some of our favorite reads from the week:
- Market due for a drop?
- One of our must visits every week
- Some historical techinical context