It’s been quite the ride up for markets in 2012. If you’re keeping score, we have the SPX up 6.7%, Nasdaq up 11.5% and the Dow Industrials higher by about 5%.
Pretty good numbers for an entire year, but for the first five weeks of the year? Off the charts! Could the markets have been so undervalued prior to the new year starting? Are bonds all the sudden poison ivy?
Did the situation in Greece and Europe suddenly make everyone so bullish? Or is it seasonal trends? Some of these questions are yet to be answered but when trying to figure out the market – we’ll let it ‘do its thing’ and not try to explain the action.
Low volatility marks little fear. For now, stock-picking is the game to play.
We’ll be heading into the last couple of big weeks for earnings as February winds down. While there are always earnings to consider the majority will be done reporting for Q4 2011 by the end of February.
By and large the results are as I had expected – strong for the biggest and brightest, a few struggles but most with a decent outlook toward the future. This past week saw some major breakouts on the charts.
Look no further than Apple – a near high of $500 a share. The stock lifted nearly $30 on the week, a 7% rise. Others kept up the pace and delivered strong results such as BWLD, CSTR, CERN and CMI. Several energy names are on tap this week along with names like BIDU, CF, ANF, CLF, WTW, APA, GM, and VFC among many others.
With expiration week upcoming it should be a very interesting time.
Let’s talk a little Fed, housing and Bernanke. With the explicit dovish policy by the Fed, it appears the Chairman is targeting areas of the economy that could use a bit of juice.
Friday he talked about housing and the drag that it has become on growth. Some have implied his bold comments will signal another round of QE, but I disagree. The housing market seems to at least bottomed and at best will show some growth.
Some experts and even Weyerhaeuser believe new home starts will be roughly 650K per month this year, a far better pace than in 2011 (but well off the hot pace of five years ago plus). The chart below shows perhaps the slow climb is happening. So, does the Fed need to ‘prime the pump’ more?
Highly unlikely, just as they didn’t do much to improve the domestic economy recently other than some ‘choice words’ and rhetoric. We can argue day and night about it but the reality is sentiment and psychology are chief drivers of action.
The Fed is more likely to ‘manage the mind’ rather than destroy what has been achieved.