The S&P 500 (NYSEARCA:SPY)
moved higher today, pushing into resistance seemingly unimpeded, and now is closing in on its old record high set in October, 2007, of 1,565.15, approximately 11% away.
Other major U.S. indexes also gained with the Dow Jones Industrial Average (NYSEARCA:DIA) jumping 58 points, the Russell 2000 (NYSEARCA:IWM) gaining nearly 1% and the Nasdaq 100 (NYSEARCA:QQQ) conitnuing its climb above 3,000 a level first reached in November, 1999.
The advance is being propelled by the promise of low interest rates and easy money from the Federal Reserve, improving economic dataand the crisis in Europe moving to the back burner for the time being, at least.
Top performing sectors were Financials and Industrials, with the Industrial Select Sector SPDR Fund (NYSEARCA:XLI) climbing 1.2%
and Financial Select Sector SPDR Fund(NYSEARCA:XLF) +1.75%.
The long beaten down financial sector is up 18% since the start of 2012 and continues powering higher on the strength of easy monetary policy and improving economic conditions in the United States.
Today’s reports included the Empire State Index, Unemployment Claims and Philadelphia Fed which all indicated modest economic growth.
Tomorrow brings prices, industrial production and consumer sentiment.
With today’s big advances limited to just two sectors, the overall health of the rally comes into question. The McClellan Summation Index measuring intermediate to long term market strength and breadth (advancing stocks – declining stocks) declined by 0.54% to below neutral 905 and below both its 20 and 50 day moving averages, indicating weakness under the surface of the major indexes. Also, the % of stocks above their 200 day moving averages was flat and overextended at 88%.
Bottom line: A narrow advance today was good news for major indexes and ETFs, but with overbought conditions and still declining breadth, the overall health of the rally remains in question and caution could be a good strategy. However, in the era of “Rambo Fed,” unusual events continue to occur.
Disclaimer: Wall Street Sector Selector actively trades a wide range of exchange traded funds (ETFs) and positions can change at any time.