Saturday July 18, 2015

$SPY, $STUDY After one week into the earnings season, the message from the stock market is that things weren’t bad. Large cap technology stocks stood out as the brightest spots which pushed the NASDAQ to yet another record today. A blowout report from GOOGL lifted the whole internet sector. On the negative side, a stronger dollar continued to take its toll on energy and material stocks, as well as consumer stocks with large international presence.

Better than expected earnings reports, coupled hopefully with a resolution to the Greek debt crisis, at least a temporarily resolution, has brought VIX (11.95) to the lowest level since last December.  Rebounding technical conditions allowed Investors to begin to return their focus to an improving economy and better than expected earnings reports. Most of the major averages had also traded back above their respective 50-day and 200-day moving average which is a plus. However, the DJ Utility Index, DJ Transportation Index and Philadelphia Semiconductor Index were still below those resistance levels. The NASDAQ made it into record territory but it was the only index that broke out to a new high.

A quick review of the Alpha Major Market Model below shows the week ended with most of the indexes consolidating gains from the last week and only the NASDAQ breaking out of its trading range. Over all it was a status que week for our models with no major changes to report. The NASDAQ breakout was due to huge moves in a handful of big name tech stocks and the record run at this stage is a non-confirmed new high. The market still faces some headwinds with Greece and China but this week’s action was encouraging for bullish investors. Earnings have been beating lowered expectations and if that continues it could trigger a summer rally by the broader market. Keep an eye on the internal breadth numbers for confirmation that any breakout to new highs has broad sponsorship. That would signal that this week’s rally is for real. Otherwise the market remains range bound. Things can change quickly during an earnings season, and it remains a stock picker’s market.