This week the stock market blasted off to new all-time highs for the DJIA and S&P 500 Index, while the NASDAQ had its highest prices since September 2000, but still well below the peak of 5048.62 set on March 10, 2000. The NASDAQ advanced five days in a row. Since the last market low point on June 24, the markets have accelerated forward at a faster pace than during the April 18 to May 9 period which is quite amazing. It wouldn’t be surprising for the market to pause or consolidate at this point.
The NASDAQ Composite easily vaulted over 3500 and even closed slightly above 3600 at 3600.08 on Friday. For the week this index was the leader advancing a solid 3.47%, followed by the S&P 500 up 2.96%, and the DJIA up 2.17%. It appears that positive comments from Ben Bernanke were the impetus for the market surge at week’s end.
Bond prices took a big hit on July 5 and attempted to claw their way back up this week but fell short. Bond prices will continue to be under pressure. We are now in a secular bear market in bonds according to the well-known Dan Fuss long-time (43 years) manager of the Loomis Sayles Bond Fund (LSBDX) which has declined 5.58% since its high on May 8, 2013. Bond ETF and mutual fund investors need to decide whether to hold on to their bonds to sell them so they don’t experience a further loss of principal. Holders of actual bonds (such as municipals) can hold to maturity and receive their principal back as long as the bond does not default before the maturity date.
In summary, the short-term market trend over the past two weeks is positive. This week the number of NYSE stocks making 52-week highs was the highest in months at 551.
Indicator Review – One Change This Week
Indicator #2 NASDAQ Composite Index and 100-dma. This indicator remains on its January 3 BUY signal with the index price well above its 100-dma. (Refer to first chart).
Indicator #5 NASDAQ Composite with MACD. This indicator had a positive MACD crossover on July 3, thus triggering a BUY signal on that date. (Refer to first chart).
Indicator #6 AAII Weekly Investor Sentiment Survey Bullish Percentage. The latest July 11th bullish percentage reading of 48.9% was an increase from it July 5th bullish percentage reading of 42.0%. Investors are now very bullish looking out six months. Therefore, this indicator remains on its BUY signal as of April 18th, but is getting close to the critical 50% level where a reversal in sentiment tends to occur.
Indicator #8 NASI Summation Index and MACD. The indicator issued a BUY signal as of July 8th as both the Index and the MACD had positive crossovers. (Refer to second chart).
Dashboard Remains on “4” Bullish signal
The latest Dashboard data is presented in the link below:
www.dark-liquidity.com/BDHV2new.php independently tracks the BDH performance. The Dashboard ETF portfolio year-to-date is up 8.16% which has improved substantially from prior weeks, but is still well below that of the three major indexes. Year-to-date, the NASDAQ Composite is up 19.23%, S&P 500 is up 17.81%, and the DJIA is up 18.01%.
Top 5 ETFs
The Top 5 ETFs are up 7.00 % since the April 26, 2013 buy signal compared to the market averages up 6.95%. The table with the data is provided in this link:
SMH was sold on 7/5 for a profit of 4.29%. Three ETFs were purchased, as the Dashboard was on a BUY signal. They were IWM, IBB and PBW. Currently there are a full five ETFs in the portfolio.
Note that on the etfscreen.com/buydonthold Decision page that the top 30 out of 42 ETFs have a “pass” rating which attests to the market’s rapid rise off the June 24 lows. On July 8 about 14 ETFs had already experienced a “pass” rating indicating a market that had begun turning around.
Conclusion – Market in Powerful Advance
The stock market has had a very positive two week run to all-time highs in two out of three of the averages. All technical data is positive and somewhat extended. With no resistance levels above the DJIA and S&P 500 Index, these indexes could continue to rise further. And the NASDAQ, although not at an all-time high, is leading the averages this year. Do not become complacent here and forget to have your stop LIMITs in place, as markets can change direction at any time. Enjoy the good run as long as it lasts, but protect your profits before they wither away if a decline occurs.