Nasdaq Hits A New Record High Ahead Of The G-7 Meeting

The Nasdaq hit a fresh record high and officially ended its four-month “correction.” That came shortly after the small-cap Russell 2000 ended its correction and hit fresh record highs. Clearly, those are the two areas of strength as they were the first indices to breakout and hit fresh record highs. Separately, the Dow Industrials and the S&P 500 are still trading below their 52-week highs but appear to be on track to hit new highs soon.

Right now, we are seeing a classic case of a great mini-rotation -where the leading indices pause to digest the recent/strong rally while the weaker ones play catch-up. It is important to keep in mind that the leading indices are extended right now and way overdue to pullback. I would like to see a nice quiet light volume pullback over the next few weeks.  Unfortunately, the tail doesn’t wag the dog and the market doesn’t do what I tell it to do.  We’ll just have to wait and see.  That said, the end of the month and the end of the quarter are around the corner and they usually have a slight upward bias.

A CLOSER LOOK AT WHAT HAPPENED LAST WEEK…

Mon-Wed Action:

Stocks rallied nicely on Monday after a few large tech stocks hit fresh record highs. Shares of Apple, Netflix, Amazon, Nvidia, and Microsoft, all hit new highs which helped lift the tech-heavy Nasdaq higher and the broader indices as well. In other news, earnings season has largely died down and, on average, Q1 earnings largely beat estimates by a very nice margin. 

Stocks were relatively quiet on Tuesday as the Nasdaq hit a fresh record high and trade concerns weighed on the broader market, specifically financials. China said that it will buy close to $70B of goods from the US if the tariffs are not imposed. Elsewhere, rumor spread that the White House is open to the idea of creating a new trade deal with Mexico and Canada to get out of NAFTA.

Stocks rallied nicely on Wednesday helping the benchmark S&P 500 breakout of its recent handle pattern. The action remains healthy as other areas of the market that had been under pressure perked up: financials, housing, biotech, and healthcare just to name a few.

 

Thur & Fri Action:

Stocks were mixed on Thursday as the Dow led while the Nasdaq, S&P 500 and small-cap Russell 2000 ended lower. Separately, Warren Buffett and Jamie Dimon publicly said companies should stop reporting quarterly guidance because it is “too short term” and hurts long-term investors. Stocks were relatively quiet on Friday ahead of the G-7 meeting.

 

Market Outlook: Bullish Action

The small-cap Russell 2000 hit a new high which is bullish for the broader market. The other indices are acting well and still trading between important resistance (2018’s high) and important support (February’s low). Until either level is broken, I have to expect this sloppy, sideways action to continue. On the downside, the big level of support to watch is the 200 DMA line and then February’s low. For now, as long as those levels hold, the longer-term uptrend remains intact. Conversely, if those levels break, look out below. On the upside, resistance is now 2018’s high.  As always, keep your losses small and never argue with the tape.