Stocks gapped up Friday, quickly advanced in the first half hour, took out the highs of the past two weeks (most likely setting off a lot of stop losses of the shorts) and then went sideways the remainder of the day. In the end the S&P 500 added 0.57% and the NASDAQ 0.91%. Data showed Chinese exports grew more than expected, while another report showed the U.S. trade deficit had narrowed in December, indicating the U.S. economy strengthened in the fourth quarter.
We mentioned yesterday that if this was how the S&P 500 was going to consolidate the move of latter January – correcting via a sideways chop rather than downward price, the bears could be in for a rough time of it. The S&P 500 did marginally clear the range of the past two weeks, although there was not a ton of committment. Usually when a level like this is cleared there is a lot of momentum that day; today it was cleared and then stocks went to sleep the rest of the session.
Part of that may have been due to the resistance in the NASDAQ which finally made a run at fall 2012 highs. You can see how that was the top end of the range today for this index.
LinkedIn (LNKD) as mentioned yesterday, was the star of the show, performing even better than it had in after hours when it was up “only” 10-11%.
Looking at commodities not much new to report here – oil tried to break out and failed, while gold and silver both remain in no man’s land.
You can see silver has a mini triangle it is within, which way it breaks out could lead to some clues of an intermediate move.
Gold meanwhile has been stagnant while this long term descending resistance slowly comes down to current price levels. If it can jump over this line, that could be a major positive for the bulls. If not, a new downturn may be in the future.
SentimenTrader.com had another interesting note last night on fund flows.
The chart above shows the four-week sum of flows into and out of U.S. domestic equity funds. This is provided weekly by the Investment Company Institute, with a one-week lag. There isn’t much history, but we can see that over the past few years, when the four-week flow turned positive, stocks tended to turn negative. Not only is it positive now, it’s at a new record high.
For a longer-term view, let’s look at the three-month sum of flows provided by Lipper, shown below. This is more comprehensive, including both mutual funds and ETFs. This data, too, has shown that when investors have shoved a lot of money into stocks, it tended to be “late” money and stocks struggled. Like the ICI data, this one is not only positive now, but at a new record high.