We got just what the doctor ordered and then some yesterday. April began with a strong start, enough to vault the S&P 500 (SPX) to an all-time high. Was it not just a week ago that we were preparing for another crash? Furthermore, the Dow Theory cognoscente are getting all lathered up as the Dow Jones Transports (DJTA) hit an all-time high and the Dow Jones Industrials (DJIA) is within a few points of making an all-time high of its own. If, according to Dow Theory, both of these indexes make and hold all-time highs, it would be the stock market equivalent of getting three triple bars at a slot machine.
Need Small and Mid Caps to Make New Highs
While I would welcome the Dow Theory signal coming true (why not?), on the other hand I would prefer to see the more growth oriented and “risk-on” S&P Midcap 400 (MID) and Russell 2000 (RUT) also make all-time highs. The Midcaps are three index points away while the Russell 2000 has a little bit more work to do, needing to rise 2.03% to accomplish that feat. I expect it will and continue to hold the ProShares Ultra 2000 (UWM) ETF as a portfolio overlay.
I listened to the General Motors (GM) CEO Mary Barra’s testimony on Capitol Hill. While the company went through bankruptcy reorganization, the company’s culture did not. General Motor’s stock remains in the dog house and I would not touch it.
Getting Ready for Labor Reports
Today’s ADP (ADP) report will give us a glimpse into March’s labor report which is scheduled to be released on Friday. Economists expect the ADP report to say that 195,000 jobs were created in February. Also on the agenda, are earnings from Monsanto (MON), the agricultural chemical and seed manufacturer.
Within the next few days we will begin to get some pre-earnings warnings from companies that are expecting to disappoint the market. That process should last about a week until earnings season kicks into high gear when the money center banks begin to report at the end of next week.
As for today, I am expecting mildly positive follow through from yesterday’s market move higher though it is likely that we will swing between gains and losses for most of the session.
Please continue to email me your queries related to the markets or economy at email@example.com and I will compile the questions and answers for publication next week.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long UWM — although positions can change at any time.
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