This Pattern Continues to Drive New All-Time Highs for S&P 500
The indices may be extended, but the intraday strength is steamrolling skeptics.
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The most interesting and significant characteristic of the market action since the move from the lows in April to all-time highs on Thursday is the intraday strength. There has been a very strong tendency for the indices to open near the lows and close near the highs. The action on Thursday was a strong example, with the S&P 500 closing flat and ending the day near its highs with a gain of 0.6%. The other indices performed in a similar manner and were boosted with a breadth approaching three-to-one positive.
Another impressive aspect of the market action was strength in the Russell 2000 IWM. Investors have shown interest in smaller, more speculative stocks and have created some very strong momentum. My list of stocks gaining more than 10% was too long to count on Thursday.
This tendency toward intraday strength and small-cap outperformance is trapping the anticipatory bears that have been forecasting for months that increased inflation would trip up this market. It isn’t happening, and overbought technical conditions haven’t mattered either. There has been some minor "sell the news" action, but it has not been persistent, and the dip buyers are still very strong.
There are a few earnings reports after the close on Thursday and then consumer sentiment and housing starts on Friday, but nothing really significant to scare away the confident bulls. Next week the bears will have another chance at negative reaction to earnings reports but they are desperate for this market to slow down and they keep helping it go even higher.
It may sound very trite and simplistic, but the old adage "the trend is your friend" is working very well.
Have a good evening. I’ll see you tomorrow.
At the time of publication, DePorre had no positions in any securities mentioned.
