Follow-Through Day Comes With Strong Market Internals
While the bulls still have some work to do, today’s gains increased the odds that risk assets can rally for some relatively sustainable period (maybe a few weeks). With quite a bit of economic data on tap during the remainder of the week, the bears may have their say before the holiday weekend. For now, conditions remain favorable for a continuation of the current rally.
Wednesday’s gains came on mixed volume (higher on the NASDAQ, lower on the NYSE). Market breadth (advancers vs. decliners) was very strong.
The ISM Manufacturing Index came in above expectations at 56.3, which remains indicative of economic expansion. The ISM number gives some legitimate backing to having Friday’s employment number come in slightly above expectations, which would be better than recent disappointing news on employment.
We invested some relatively tame amounts of cash into consumer staples equities and dividend-paying utilities today. We also have kept a decent amount of cash on the sidelines for now. Today’s investments represent a more conservative way to gain some exposure to risk (relative to more cyclical positions that we already hold). The vehicles we used to gain access to consumer staples and utilities are very flexible and trade commission-free, which will allow us to remain very nimble in a still fragile economic and market environment. Today and last Friday represent steps in the right direction, which is an improvement over what we have seen in recent weeks.
