The market continues acting great considering how weak it was acting just a few weeks ago. The benchmark S&P 500 closed on Friday within a fraction of a percent below its record high (which is very healthy). Meanwhile, it was very healthy to see the Nasdaq, Nasdaq 100, Philly Semiconductor index ($SOX), and Mid Cap indices ($MDY) all hit fresh 2014 highs. So far, the action continues to support our bullish thesis that this was just another pullback within a broader uptrend. The short, intermediate, and longer term action still remain very healthy as the market simply paused to digest last year’s very strong gain. Furthermore, the bullish fundamental backdrop is still in place for stocks. Keep in mind the US economy is the largest it has ever been in history and is still growing (albeit slower than Wall Street wants). The bulls are looking for two possible scenarios to occur: 1. The economy grows organically or 2. The Fed continues (or increases) QE to help the economy grow. Barring some unforeseen negative event, both scenarios are bullish for stocks.
Mon-Wed’s Action: Valuations Still Within Reason
Thurs-Fri’s Action: Stocks Are Strong
Stocks opened lower on Thursday but the bulls quickly showed up and promptly quelled the bearish pressure and sent stocks higher by the close. Shares of Facebook (FB) opened lower after the social media giant said they will acquire WhatsAPP for $19B but closed higher as buyers stepped up and sent prices to fresh record highs. Elsewhere, shares of Tesla (TSLA) soared to a new record high after the company smashed estimates. Stocks fell on Friday as a slew of options expired (caused the heavy volume).
Market Outlook: Uptrend Intact
The market is following our script perfectly. In late Jan/early Feb we wrote saying that this appears to be another normal (and healthy) pullback within a broader uptrend. That is exactly what occurred. As always, keep your losses small and never argue with the tape.