The popular averages continued to the upside on Tuesday amid thin trading volume.
The S&P 500 has been up six days in a row. Existing home sales slowed less than expected
in March. Netflix (NFLX +7.0%) and Harley-Davidson (HOG +6.4%) both rose on better
than expected earnings. Meanwhile, the prices of crude oil and gold both fell on
In the American automaker sector on Tuesday, General Motors (GM +0.7%) announced
a restructuring of its engineering department. Ford’s (F +0.8%) credit rating was
affirmed BBB- by Fitch with outlook revised to positive. Tesla Motors (TSLA +7.0%)
CEO Elon Musk personally delivered the first Model S’s to Chinese customers, while
stating the company will build a car factory in China in a few years. He said the
US location for the Tesla battery Gigafactory will be announced in a few months along
with a likely partnership with Panasonic. See the video below of Musk being interviewed
on the March 30th “Sixty Minutes” broadcast.
Above is my three-month chart of the S&P 500 exchange traded fund (SPY). A late
January drop pulled a lot of money out of the market after pundits cried that a bubble
could burst. Heavy trading volume had been evident in the resultant bottoming formation
during the turn into February. The up day on February 4 indicated a washout. Bottom
fishers profitably entered the market on signs that the selling was overdone, at
least for the intermediate term. The SPY then soared to a new high. The rise stalled
for a while. Then the bounce after approaching the 50-day moving average in late
March appeared encouraging, especially after again reaching new highs. However, the
push downward on April 4 caused my outlook arrows to start losing their green. The
rally on April 8 & 9 restored some hope. But then April 10 & 11 looked like repeats
of April 4 & 7. The SPY’s fall through its 50-day moving average on heavy volume
was not welcome to many, but appears to have created a buying opportunity.
Note the similarity between the U-turn in January-February and this month. In
both cases the SPY’s 50-day moving average was breached as Pied Piper pundits scared
people into bailing out of the market. Once they were cleared away, rallies commenced
and the 50-day MA was exceeded. Another rally as significant as the one in February
may be underway.
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