A late day selloff knocked the S&P 500 back to near break even but after lagging for a few weeks money has rotated back into tech stocks and small caps. This is a hallmark sign of a major bull market - constant rotation. The S&P 500 gained 0.01% and the NASDAQ 0.58%; for those who like round numbers the NASDAQ broke back over 4000 for the first time in 13 years. A good report on building permits - at a 5 year high - helped lift the housing sector out of recent doldrums. The Commerce Department said building permits jumped 6.2 percent to a seasonally adjusted annual rate of 1.03 million units. That was the highest rate since June 2008. Economists had expected building permits at a 930,000-unit rate in October. Permits increased 5.2 percent in September. August's permits were revised to a 926,000-unit pace from the previously reported 918,000 units. Permits lead housing starts by at least a month.
It is getting frothy out there. We are in the midst of yet another V shaped rally off a bottom, similar to so many during the quantitative easing era. Earnings from Google (GOOG) yesterday seemed to light a fire under all the momentum type of stocks, especially the technology type today. The NASDAQ surged 1.32% and the NASDAQ gained 0.65%, as we have seen an almost straight up move since a week ago Wednesday. We don't show the 5 day moving average on our charts since it is a very short term indicator but the indexes are as far above their 5 day moving average than they have been at any point in 2013. So we are at a bit of an extreme level.
While simplistic, following recent patterns *sometimes* works. In this case during the second half of 2013 whenever we have a modest correction of 3-5%, the ensuing rally has been dramatic and violent to the upside, with the majority of the move coming in the first 12-14 sessions. We appear to be in another such pattern. Yesterday we noted IBM revenue missed and that generally leads to some downside since the DJIA is so reliant on the stock. We mentioned that if the market opened down it would be interesting to note how quickly the buyers showed up. Well we got our answer today - very quickly! You can see that from the intraday chart below - the red line is where yesterday's close was. Buyers came in early and continued lifting the index all day. The S&P 500 gained 0.67% and the NASDAQ 0.62%.
Thursday was a decent day as some of the indexes made a move out of the "bull flags" they had been building but the NASDAQ lagged due to Intel (INTC) and after hours both Google (GOOG) and Microsoft (MSFT) posted earning reports that disappointed. More on that later. Bernanke was facing the Senate today but added nothing new and quietly made his way out, seemingly for the last time as he heads towards retirement from the post. Weekly jobless claims dropped by 24,000 to a seasonally adjusted 334,000, its lowest level in four months. The S&P 500 gained 0.50% while the NASDAQ added 0.04%.
Quick Reminder from Blain: Yesterday I posted the Q2 2013 Reader Satisfaction Survey. If you have not taken it yet, please do, we want to hear from you, thanks!
A speech and Q&A session with Fed head Ben Bernanke yesterday after the market close helped push stocks into overdrive Thursday as the markets gapped up strongly and never looked back. A late day surge pushed stocks into their highs of the session. The S&P 500 gained 1.36% and NASDAQ 1.63%. Unfortunately everything continues to be about central banks rather than much about fundamentals. The chairman of the Fed said the economy needs easy-money policy "for the foreseeable future." Further, the unemployment rate may be understating the issues in the labor market. This is because there have been so many dropouts from the labor market the unemployment rate is about 2% lower than it would normally be. So it is the same old, same old folks - as long as the punch bowl dealer remains ready to hand out punch in excessive loads, the stock market is happy. When his supply is even rumored to be cut off - well you saw what happened from late May to late June.