The general market has been consolidating last Friday's move the entire week. Each morning we have had a gap up or down (not big ones) and then after 11 AM the market is listless. There is no volume out there and it appears everyone with big pockets went to the Hamptons. If it were not for all the gap ups in a row Fri-Tue (can't see it on the stockcharts.com chart) this would be a little bit more of an assuring pattern, but take those away and you have a solid bull flag forming on the S&P 500.
While a quiet week on the surface, sea changes are happening underneath. This week's strength is mostly concentrated in names that were the laggards of the past few months as we have seen the makings of a large rotation. Note the bull flags in semis, commodities, and industrials. (Transports, which I flagged yesterday continue to be an exception)
Meanwhile the "technical leaders" have not had quite the performance – the PDP ETF (based on intermediate term relative strength measures) is below Friday's close. Perhaps they need to make a "technical laggards" ETF for times like this.
Of course the leaders of the past few months have been the laggards in this move – namely REITs and Utilities. (Healthcare is a mixed bag)
So in the big picture that is the action you want to see if you are an intermediate term bull although the reasons for it happening (central bank action) rather than economic expansion is rewriting the playbook. In fact after I reviewed all the news out of China and Europe this week it is amazing that pro-cyclical is the leadership group since last Friday. But this is the new market where central bank action supersedes everything.
Speaking of…gold continues to perk up. A break over this $158-$159 level on the Gold ETF would be technically constructive.
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund's holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog