US stocks on Friday diverged, with industrial and technology stocks moving the opposite way. Microsoft, Google, IBM dropped after Q1 earnings reported lower than expected, causing the other technology stocks sell-off. Meanwhile Norfolk Southern broke-out under solid earnings report, providing other transport shares a cordial. Dow rose slightly, the market rotated of the tech sector into industrial shares. At this time, Dow is just an inch away from a new high while NASDAQ stocks still has to go another 6% to the new high ground.
Historically, Dow and S& P500 are the first to enter weak season, while the Nasdaq follows suit. Dow benefited from strong emerging market and commodity market bottoming out and rebounding, but technology stocks are affected by short-term currency exchange rate adjustments. To my view, this currency adjustment should not be able to control fluctuations in the overall market longer-term. After all, Microsoft, Google, and IBM are not market leaders. And Facebook, Tesla, etc. may determine the genuine intentions of the market next week or so.
Since the stock market enters the weak season and is unwilling to compromise, this indicates its strong inherent intention to go new high. Current Fundamentals are comparable to 2009 after the bear market bottomed out, with the market anticipating improved fundamentals 3-6 months forward; while the index technically parallels to 2012, with market psychology up to 47% bearish not a bad thing. Because there are ample uncertainties in an election year, the market seems to slowly digest those uncertainties and create an antibodies.
Trim some position with 15%+ return ,and wait for ER.
Gunning Ju
A long time market analyst
4/24/2016 from Flushing, NYC
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