Thursday continued another breathtaking advance in a series of them since 2009. Since bottoming out a week ago the S&P 500 has essentially traveled 50 points up in a straight line despite a bevy of weak economic data, and corporate earnings that showed lagging revenue while beating (lowered) guidance. The bears seem powerless. The only thing that stopped the bulls today was a late day news report that Germany's court had some issues with the ECB's backstop plan for Italy and Spain - but it was essentially an excuse to breathe after a romp all week. The S&P 500 gained 0.4% and NASDAQ 0.62%.
The head and shoulders idea now looks kaput. While the S&P 500 has yet to make a new higher high it would appear with the way all data is seen as positive (good is good and bad means more central bank action) it is only a matter of time. Tomorrow we have a GDP report but will it matter for more than 3-4 hrs? A bad GDP report means more QE, a good GDP report means improvement in the economy, etc etc.
The S&P 500 is now back firmly in its channel and was making a run to all time highs before the German news report came out.
The NASDAQ has now rallied all the way back to the underside of its channel.
This week we saw the return of action to small caps and cyclical groups which is a net positive. The Russell 2000 of smaller cap stocks was the first index to make a new lower low - usually a warning sign but in a Quantitative Easing market, none of this seems to matter.
The McClellan Oscillator in a week has gone from -40 to +36, it was nearly +50 at the peak today.
Oil had another strong day - a natural move when cyclicals are in favor again.
In terms of sectors, it was a very similar day to yesterday - the cyclical groups outperformed while the defensives had muted moves.
As we enter the seasonally weak period of the year it will be interesting to see if the "Sell in May and go away" mantra holds true in the QE market. BeSpoke Invest takes a look at how it has done over the past 20 years.
"The first third of the year is coming to an end, and as we enter May, trading will begin to slow as the sun comes out and temperatures rise. In the investment world, the start of May is often associated with that awful phrase — “Sell in May and Go Away” — and each year we get a lot of requests to analyze whether or not the phrase is worth following. Historically, November to April has gained roughly 6%, while May to October has gained around 1-1.5%.A better way to highlight the difference in performance may be to show how well you would have done if you only owned the S&P 500 during each of the two time periods. Over the last 30 years, if you bought every October 31st and then sold the next April 30th, you would now be up 898%. If instead you bought every April 30th and sold every October 31st, you would be up a paltry 56%.