Stocks continued their winning streak Tuesday as the Nasdaq and the Standard & Poor’s 500 Index logged their 11th up day in the past 13 sessions. The blue chip Dow Jones industrial average rose 0.6% (87 points) to 15,056, closing above the 15,000 mark for the first time ever, the S&P 500 Index increased 8 points (0.5%) to 1,626, notching its own record close, and the Nasdaq Composite gained 4 points (0.1%) to 3,397.
Among the seven industry groups within the transportation sector, air freight and shipping did best. The Dow Jones transportation average led with a 1.6% gain. Volume grew on both major exchanges vs. Monday’s trade. 630 million shares were traded on the NYSE, and 1.7 billion shares changed hands on the Nasdaq.
Similar to yesterday, with the absence of notable economic data, earnings shaped the early price action followed by a surprising rate cut from the Reserve Bank of Australia (RBA). The central bank cut its benchmark interest rate by 25 bps to a record low of 2.75%, noting that it has decided to use some of the scope that the inflation outlook has afforded to ease further. The Bank of England will probably leave its stimulus program on hold this week amid signs the economy has found a firmer footing. Moreover, an unexpected jump in March German factory orders gave global stocks a boost to set the tone for trading today.
Meanwhile, in the U.S., Consumer borrowing in the U.S. climbed less than projected in March as Americans reduced credit-card purchases for the first time this year. According to the Federal Reserve, the $7.97 billion increase followed an $18.6 billion advance the previous month that was the biggest since May 2012. The consensus estimate called for a $15.6 billion rise.
Revolving credit, which includes credit-card spending, fell, while non-revolving borrowing rose. The tempering of credit-card use coincides with a slowdown in March consumer spending amid higher payroll taxes and limited income growth. House prices strengthened further. The CoreLogic Home Price Index advanced 2.0% in March, reaching its highest level since November 2008. Prices are now near their early-2004 level. On a y/y basis, prices are up 10.5%, the most since March 2006, indicating a strengthening housing market.
Will the market continue extending its rally as more investors have rushed to join the party? MBA Mortgage Applications data, China’s trade balance, and industrial production from Germany are set to be announced tomorrow. The indexes might find more support to feed the hungry bull.
Again, as many investors linger in astonishment about this Fed induced rally, it supports my long held view that it is best to simply follow the long-term trend and not overanalyze the reasons why the market may fail or rally further. Using trend tracking and trailing sell stops is all we focus on, which eliminates the often difficult emotional decision making process.
Our Trend Tracking Indexes (TTIs) followed upward momentum and closed this day as follows:
Domestic TTI: +4.47%
International TTI: +8.88%
The latest update to the ETF Model Portfolio report will be posted tomorrow morning.
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