The past week in the stock market began with a dip on Monday and a surge on Tuesday, then chopped around without direction the rest of the week, ending on another in what has been a recent series of uneventful option expiration days – labeled by Dave Fry “the most boring expiration ever!” Whatever, the SPX gained better than 2% on the week and the NDX managed nearly 3%. Since we’re playing a rally on the long side, we’ll take it, thank you very much.
Volume isn’t heavy but isn’t bad either, for summer. Another good sign: leading stocks are leading – Apple broke to a new high. Market skeptics are incredulous, but the rally continues, and it’s hard to see the pros not holding it up through the end of the quarter (window dressing). That, to me, is the next inflection point. While we’re on the subject of new highs, gold and TIPs also joined the party, giving more evidence that the investoriat is stuck on the inflation meme. However, straight Treasuries at the longer end of the curve were bid up for the week, so we can see the deflationists are in there as well.
Beaten down Europe came back from the doghouse (guess all the hate shifted to BP last week), as the Euro 350 Index picked up 4%, the euro gained 2%, and even Eurozone bonds found a few friends. All this in a week when the news and rumor coming out of Spain was…well…kind of alarming. To me this looks like picking up pennies in front of a steam roller, but I wish them all the best. Me, I’m staying away from Eurozone assets. Far away.
In keeping with the general enthusiasm for risk assets, commodities put up a good week, West Texas crude advanced nearly 5%, closing just under $78. Natural gas futures, which have been attracting our attention for several weeks, continued to move up and finished above the 100 day SMA. On the other side, naturally the Dollar continued to pull back from a double top (so far so good, I’m short the dollar!).
Looking at the week ahead, this little rally looks like it has legs, probably into the SPX 1130 area, by month’s end. There doesn’t appear, at this point, to be anything on the horizon to threaten the rally. Of course, we’ve been surprised by news driven events fairly often in recent years, but my read is that my new long and short positions are keepers.