The Fed Is Our Friend

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Posted: Jul 11, 2019 9:11 AM
The Fed Is Our Friend

Source: AP Photo/Manuel Balce Ceneta

Although the move ran out of gas early in the session on Wednesday, it was a broad rally with continued momentum in Technology and a bounce in Energy after a massive drawdown of U.S. crude oil. However, the Communication Services sector found traction as the rotation into momentum names continues.

Market breadth continued to improve with the declining volume on the NYSE and the NASDAQ (declining dramatically).  I like the cautious tone of the market, as the unloved factor of this rally continues to suggest a lot more to the upside.  

Symbol

Select Sector SPDR Fund

Last

Change

% Change

Volume

XLC

Communication Services

50.84

+0.57

+1.13

2.29 M

XLY

Consumer Discretionary

122.42

+0.44

+0.36

2.38 M

XLP

Consumer Staples

59.51

+0.38

+0.64

16.8 M

XLE

Energy

64.04

+0.81

+1.28

11.77 M

XLF

Financials

27.97

-0.10

-0.36

36.56 M

XLV

Health Care

93.46

+0.32

+0.34

5.35 M

XLI

Industrials

76.52

-0.18

-0.23

10.12 M

XLB

Materials

57.55

-0.12

-0.21

7.31 M

XLRE

Real Estate

38.26

+0.21

+0.55

8.59 M

XLK

Technology

80.25

+0.63

+0.79

10.11 M

XLU

Utilities

60.99

+0.14

+0.23

11.49 M

NASDAQ Breakout

When momentum names get hot, the NASDAQ leads the charge and that’s been the case this week. Of course, this poses a dilemma for investors that have missed the rally. You are going to hear a lot of mavens’ question buying at the top, but today’s top can be tomorrow’s bottom and the foundation for the next major leg higher.

The last two times the NASDAQ was breaking through a triple top, and where the mavens would have warned investors not to buy, were the following dates:

  • January 2012 at 2,905
  • July 2016 at 5,162

Sure, you would be buying the top here, but there’s a good chance a couple of years from now, you could look back and smile at buying a low entry point.

Line of the Day:

“we see the economy in a good place, and we’re committed to using our tools to keep it there.”

-Jerome ‘Jay’ Powell

The Fed is our friend, even if Powell had to use the word “origami” to say his watch will be different because there will be no recessions. 

Portfolio Approach

We added two Technology ideas yesterday.  We lowered our cash to 5%.  Click here to get started on our Hotline service today. 

Communication Services

Consumer Discretionary

Consumer Staples

1

4

1

Energy

Financials

Healthcare

1

2

1

Industrial

Materials

Real Estate

2

3

1

Technology

Utilities

Cash

3

0

1