The action last week created a positive foundation for further upside on Monday. The dip on Friday helped to consolidate gains and a few headlines helped to trigger some buying.
Stocks trended steadily higher all Monday as the focus remained on stock picking and earnings, rather than big picture worries like China, the economy, politics and the Fed. I complained about poor stock picking for quite a while, but that problem lifted last week and now there is an appetite to add long exposure by picking stocks, rather than trying to guess the short-term direction of the indexes.
A main driver of the indexes is Apple (AAPL) . It hit a new all-time high. Apple and Microsoft (MSFT) combined have market capitalization equal to the entire Russell 2000, so they provide many benefits when they are working.
The Dow Jones industrial average lagged again, but that was primarily due to weakness in Boeing (BA) . The Dow is calculated on a price-weighted basis, and BA is the highest priced stock in the Dow, but a fair amount. It offset the gains in Apple and JPMorgan Chase (JPM) .
As I discussed in the morning, it is the speculative appetite in the small cap stocks that is keeping me positive right now. When market players are willing to put money to work in higher risk stocks, it bodes well for continued upside.
We have a large number of earnings reports Tuesday, which will be the main focus. One of the problems with this strong action is that it raises expectations and makes the risk of some "sell the news" response higher. Also, there continues to be some notable pockets of weakness in high-beta technology stocks and that is not healthy.
The S&P 500 is setting up well for a run at recent highs, but may need a rest. There is nothing in the current price action that supports a bearish bias.
Have a good evening. I'll see you Tuesday.