The cyclical sectors of the market have been weakening over the last few weeks which was warning of the possibility for a pullback. However, the cyclical sectors are leading the way today after bullish commentary from the world’s two biggest central banks.
You’ve probably heard the talk making the rounds these days that margin debt is today as high as anything we have seen since 2007. In nominal terms, that’s exactly correct. So, is it really a reflection of “animal spirits” that are too highly elevated? After all, isn’t this exactly what Bernanke and friends wanted to have happen as the endgame for all the QE iterations?
It has been apparent for years that the state of the Chinese economy has a major impact on global markets. If the headline number on Chinese growth is stronger than expected that is generally viewed as good for us here in the States. If growth is slowing in China then that is going to have a negative ripple effect on the global economy.
Gold has gone nowhere since peaking near $2,000 an ounce back in 2011 and with the recent slide this month many gold investors are questioning their resolve. I’d like to look at gold from multiple points of view and identify some lines in the sand which will hopefully allow investors to make some informed decisions.
A correction is finally upon us. Traders have been holding their breath for weeks and can finally exhale. Portfolio managers holding onto 10 to 20% in cash while the market rose are probably feeling itchy on the trigger to put that money to work, as performance anxiety sets in.
The cyclical sectors of the market have been weakening over the last few weeks while defensive sectors have strengthened, a sign of sector rotation that typically occurs prior to market tops. Additionally, there were a few canaries in the coal mine beginning to sing as highlighted two weeks ago that suggested a short term top was in the making.
The market continued to defy gravity and overbought conditions, closing on a new 5-year high. I didn't find any significant headlines to pin today's rally on; it seems the bull is just indefatigable and at this point, big news isn't needed for the market to continue higher.
The Dow climbed by 0.1% and the S&P 500 fell by the same amount today. There was some intraday volatility caused by news from Wal-Mart as internal company e-mails surfaced with executives complaining about February sales being a "total disaster", which led to a selloff in the markets at the final hour of trading.
Money talks and big money screams. Wall Street saw the flurry of mergers and acquisitions activity continue. Legendary value investor Warren Buffett and Brazilian investment firm 3G Capital partnered to buy H.J. Heinz today.
The markets continue to display impressive strength with a bullish outlook for the short to long-term view. We have a broad-based rally where every sector is participating as well as every market cap.
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