Major indices all hit new all time highs as small caps lead

New All Time HighsMediamodifier / Pixabay

Commenting on today’s trading Gorilla Trades strategist Ken Berman said: While yesterday, market internals weren’t confirming the new all time highs in the major indices, small-caps were very strong today. It’s always good to see the Russell 2000 outperforming its large-cap peers, and today’s session was especially encouraging following weeks of weakness among small-caps, even if the index still has a lot of catching up to do.

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Q4 2019 hedge fund letters, conferences and more

New All Time Highs for stocks whats next?

The major indices finished virtually unchanged despite a decisively bullish start to the session, as stocks drifted lower in the afternoon, due to the lingering coronavirus-related worries. The Dow was up flat at 29,276, the Nasdaq (INDEXNASDAQ:.IXIC) gained 11, or 0.1%, to 9,639 while the S&P 500 (indexsp:.inx) rose by 6, or 0.2%, to 3,358. Advancing issues outnumbered decliners by an almost 3-to-1 ratio on the NYSE, where volume was slightly above average.

Interestingly, most of the key sectors finished the choppy session in green despite the afternoon dip and the fact that the large-cap indices were flat. The materials sector was the strongest, with energy-related issues remaining volatile, while consumer goods and tech stocks lagged the broader market. The telecommunications sector was buoyed by the court-approval of the merger between Sprint (S, +77.5%) and T-Mobile (TMUS, +11.8%), as the market hailed the potential synergies that might be uncovered by the deal.

The JOLTS job openings estimate missed expectations for the second month in a row, and while the indicator is considered highly volatile, it has been trending clearly lower since early-2019. According to last week’s government jobs report, the ADP payrolls number, and the number of new jobless claims, the job market remains healthy, but since the Challenger job cuts number also spiked higher in January, we might be seeing early signs of weakness. The consumer economy has been the engine of growth in recent quarters. A weaker job market would a major hit to GDP growth in the second half of the year. Will this prevent equities from making further new all time highs? We will have to wait and see.

JOLTS Job Openings Missed Expectations

Fed Chair Jerome Powell testified in Washington today and he reiterated that the Central Bank is closely monitoring the effects of the coronavirus outbreak, which already caused a sizable drop in Treasury yields. Mr. Powell also noted that the domestic economy remains very strong in an international comparison, but the very low interest rates will mean that the Fed will have less ammunition to tackle a coming recession. Yields ticked higher in the wake of the Chairman’s words, although it’s unclear whether investors should prepare for more hawkish monetary policies in the coming months and years.

We will have a relatively calm day, in terms of economic releases, but as Mr. Powell will testify again the morning session could be busy in the Treasury market. The energy sector could see more volatility, due to the weekly crude oil inventory data, and while the price of the crucial commodity remained under pressure despite the global rally in stocks, a bullish data might lead to a possiblly violent short-covering event. Given the continued weakness in the global manufacturing sector, the Eurozone industrial production report could already make waves in pre-market trading.

New All Time Highs For All Major Indices

Technical Corner. As the major indices all hit new all time highs today, it’s no surprise that the key trend indicators continue to point higher across the board, even as the Dow Jones Industrial Average (INDEXDJX:.DJI) is still showing clear signs of relative weakness. The benchmarks remain well above their rising 200-day moving averages of 8,309 for the Nasdaq, 3,026 for the S&P 500, and 27,111 for the Dow, and the indices are also above their steeply rising 50-day moving averages of 3,239 for the S&P 500, 9,071 for the Nasdaq, and 28,591 for the Dow.

Semiconductors, as measured by the popular SMH ETF had a great session, jumping by more than 2% and getting close to their all-time highs. With the resurfacing fears of global recession in mind, the sector's resilience might serve as a very important clue for investors. Semiconductors are often called the cyclicals of the new economy, and while the SMH has been lagging the broader tech sector, it's far from signaling a global downturn. The ETF is clearly above both its moving averages, and it could be ready for another technical breakout. Stay tuned!



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