CNBC reported that just 5 Dow stocks accounted for nearly 1/3 of its rise back to new highs. Most investors prefer to look at the S&P 500, which is still 35 points from its all-time high, but it too looks like it will get there in the near future.
While I joke about breaking out the party hats, it is a major achievement and something that few people would have bet on several years ago in early 2009 when most folks wanted to give up on stocks for good. It just goes to show you that the fear and greed cycle is alive and well. While the news and circumstances may change from generation to generation, investor psychology does not. Our guess is that we are still far away from a peak in the greed cycle. Most folks are still shaking off the cobwebs from the last bear market and weary about getting aggressive in stocks.
In economic news, the February ISM Services index came in at 56.0, up from January's reading of 55.2.
In corporate news, Qualcomm (QCOM) announced a $5 billion share buyback. But we have yet to hear anything from Apple (AAPL). What is wrong with their Board of Directors?
Asian markets were higher across the board overnight, led by a 2.3% bounce in China. China set a 7.5% growth target for 2013 which includes double-digit military spending increase. The Reserve Bank of Australia held rates steady at 3.00%.
Europe's markets are also higher today, after most PMI services reports came in above expectations. Spain was the only economy to miss consensus. EU commissioner Rehn said that poor European economic growth may cause leaders to rethink current deadlines for deficit reductions. That means we could start to hear talk of postponing austerity measures. This could be a good thing, as the main focus for deficit reduction should be on economic growth measures.
The dollar is roughly flat today, and commodities are mostly higher. Oil prices are up a bit near $90.41 and gold prices are higher to $1576. Copper and silver prices are up slightly also.
The 10-year yield is bouncing a little back to 1.90%. And the VIX has plunged back below the 15 level, down -5% today to 13.30 as the markets break out to new highs.
Trading comment: We have commented endlessly about the dip buyers who emerge on every pullback and the stair-step pattern of the market. This recent mini-pullback lasted about 10 trading sessions, saw the SPX pullback fairly close to its 50-day support, and them move right back to new highs. That has been the pattern for months. At some point we will get a deeper correction, but it sure hasn't paid to sit on the sidelines and wait for said correction. While many stocks are extended, fresh breakouts from consolidations remain attractive as the market stays in bull mode.
KAM Advisors has long positions in AAPL and QCOM
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