Major indexes finished in the green for the sixth week in a row, and the S&P 500 has now registered positive closes in nine of the past eleven sessions. The jawboning of Mario Draghi shows once again the power of central bankers over market participants. The S&P 500 added 0.2% and NASDAQ 0.5% as Apple was upgraded to a $900 target, leading both indexes higher with a 1.8% gain. The CBOE VIX volatility index hit a 5 year low of 13.43 before closing down 5.9% at 13.45.
As for the broader indexes bulls continue to dominate the action as the S&P 500 skims along the top end of this ascending channel. Almost every day since the ECB press conference three Thursdays ago has been sideways or up. The change in character has been striking as the first two months of this rally have been very violent (June, July) but August has been a showcase of low volume and low volatility.
The NASDAQ continues to work out of a bull flag, which broke to the upside Thursday....
And this week we saw an outperformance from the Russell 2000 - generally when we see small caps and tech stocks outperform that is a big signal of "risk on".
Transports had been lagging in August, until they turned around mid week - this is another point of victory for the bull case.
Meanwhile defensive sectors ala utilities have been major laggards as money rotates into pro-growth cyclicals.
For investors in Facebook (FB) the disaster continues, the stock hit $19 today (-4%) ala a 50% off sale from the original IPO price of $38! This is a painful but helpful lesson for many involved in the retail investor space - the founders "won" by monetizing shares, the early investors won, the investment banks won (they still get their fees), but the retail (using Goldman Sachs' term "muppets") that ran into the hyped and overpriced deal lost! Speaking of founders, Mark Zuckerberg is reported to have lost $600M since the deal priced. We all hope the man can somehow live on the remaining $10.2B of net worth - a man's gotta feed his family after all....
For the week, inflation reports were benign (benign enough for QE - which is all that seems to matters nowadays), housing showed decent data, regional Fed surveys showed contraction, and the faith in central bankers ability to manipulate and backstop markets remains firm. Eventually volatility and some degree of losses will return to markets, we'll see if next week is when it happens.
