Following a long holiday weekend, the U.S. Index ETFs rallied on Tuesday to push the stock market to record highs this year. After last week’s pullback, dipbuyers came back to life for the trading session in the wake of stronger-than-expected readings on housing prices and consumer sentiment.
Stocks trimmed a considerable portion off their highs but were able to post solid gains. The Dow Jones Industrial Average logged its 20th consecutive advance on a Tuesday. The Dow rose 106 points (0.7%) to 15,409 to close at another record, bouncing back from a loss the week before. The Standard & Poor’s 500 Index gained 10 points (0.6%) to 1,660, and the Nasdaq Composite increased 30 points (0.9%) to 3,489.
The big news of the day that gave the markets direction was the release of The Conference Board’s Consumer Confidence Index. The reading rose 7.2 points in May to 76.2, the highest level since February 2008, and above the consensus of 72.0. Over the last two months, confidence has gained 14.3 points, the biggest back-to-back increase since December 2011.
Digging into details, some analysts show the economy has continued to expand at a trendy pace in recent months. Historical patterns suggest continued economic recovery, despite sequestration and the income tax hikes earlier this year.
Consumers’ views on both current and future job availability improved, suggesting the unemployment rate could decline further. Consumers were also more upbeat about their income prospects. Confidence increased across all demographic groups and most income categories.
Equities surged out of the gate, but the early enthusiasm faded an hour into the session when the major averages notched their highs, and began their retreat towards Friday’s closing levels. The gains were broad. Eight of the 10 industry groups in the S&P 500 index rose, led by financial stocks. The only groups that fell were utilities and telecommunication companies, which investors tend to buy when they’re seeking stable, safe stocks that pay high dividends. All but six of the 30 stocks in the Dow rose.
In other economic release, the seasonally-adjusted S&P/Case-Shiller Existing Home Price Indexes posted strong gains in March, reflecting the ongoing improvement in housing market conditions. The 10-city composite index climbed 1.4%, while the 20-city composite rose 1.1%, both up for the 12th straight month.
Trendwise, today’s activity was minor as the Domestic Trend Tracking Index (TTI) barely changed and closed at +4.04%. On the International side, the result was more bullish as the International TTI moved higher from Friday’s +8.29% and closed at +8.75%.
I will update the ETF Model Portfolios later on, and they will be posted early tomorrow morning.
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Comments 2
Good morning Ulli, I need your opinion, I have a large share of my fixed income invested in HYG & JNK. Should I sell both positions at this time? Thank you. Thomas J>Brigantino Sr.;
Thomas,
As you know, I let my trailing sell stops make those decisions for me, so that I don’t have to be emotionally involved. Depending on your risk tolerance, you can use a 5% or 7% trailing stop. Figure out your high point from the time you purchased these ETFs, reduce that number by the dividends received, and then apply your sell stop. If it gets triggered, you sell; if not, you continue to hold. That’s what I would do.
Ulli…