Now all major indices, well almost all, are at new rally highs.

Friday NASDAQ broke to a new rally high, finally joining SP500 and DJ30 in that endeavor.  SP600 lagged those indices and even the mid-cap SP400.  Monday the small caps made their break as well, holding the break despite closing off the session highs.

That puts all of the indices we regularly track at new rally highs even if the small caps reluctantly followed.  Well, almost all.  DJ20, the Dow Transports, did hit a new rally high in mid-January but they have not held the move, fading back to the 50 day EMA three weeks back and thus far unable to recover and join the other indices in new high territory.  Thus the transports have not ‘confirmed’ the industrials’ move to a new high.

Yes that leaves remaining questions about the rally, but we have had questions all the way along and the market keeps taking those out, one index at a time.  Perhaps the transports will simply move back up and join.  Hell, all other indices have. 

Even with the move the indices found it difficult to hold all of the session’s gains.  The indices peeled back from the highs and at one point it looked as if the sellers might wrest control from the first of the week buyers.  Didn’t happen; stocks weren’t able to recover session highs, but they did mitigate the backsliding and held some very decent gains.  NASDAQ 0.5%, SP500 0.6%, DJ30 0.6%, SP600 1%, SOX -0.4%, NASDAQ 100 0.5%.

Catalysts?

Some new money came to market after the initial money push to start February.  M&A was pushing as well with a couple of deals involving well-known companies.  DHR announced its acquisition of BEC while ESV (oil services) staked a claim to PDE.  Companies are said to have billions and billions of dollars sitting around, and when some start buying others, the sheep characteristic of the stock market takes over as investors assume that one acquisition begets more and more.  Of course that makes sense in this economy: companies would rather buy a business than start a business.

The jobs report came back into play as well after getting favorable press over the weekend.  9.0% trumped 36K but can you really believe in such a large decline?  You want to but that kind of drop suggests a kind of recovery that frankly the small businesses are not experiencing, and they produce 75% of the jobs. 

Finally Egypt was not worse.  Not better, but not worse.  The outcome doesn’t look positive from what we can see in terms of the US holding Egypt in the ‘friendly’ category, and that can upset the path of economics in the future though likely nothing near term.

No scheduled economic data for Tuesday.  Just more earnings, geopolitical intrigue, liquidity, and market momentum.  The latter is driven by the liquidity, and those two are in control.  Only when a market wants to pay attention to news will it do so.  Otherwise it simply puts its head down and goes where it wants to go just as it has done recently during the Egyptian turmoil.

The indices have run a good distance on this second leg and are at a point they can test, consolidate, correct or otherwise, but the market has had its head down and rallying on the money that continues to enter the market and importantly, the money that continues to move through the market, tracking from sector to sector.  That movement has allowed the market to hold its gains and some indices to continue their upside moves even as some indices struggled. 

That money continues to find its way into good stocks and thus we will continue moving into those good stocks as they present buy opportunities.  Yes I have concerns about just how much more this current run can give us.  Of course SP600 joined the move Monday, but oftentimes when the last holdout gives in that move is through.  The indices closed rather significantly off their intraday highs Monday and that had us watching closely.  Closely, but they still held their breaks higher so we had to stick with the plan with respect to our positions, upside and downside.

While it has been tough going with the downside we will continue looking at downside plays as the transition from upside to downside can take time and moves in fits and starts. 

Most of the action for now, however, is still to the upside and even as many stocks appear extended others are receiving new money and moving higher.  You can call it value hunting or whatever you want, but stocks that have not moved are getting money, stocks that rallied but sold off are receiving money, and stocks that have been and still are leaders are also getting money.  Thus despite the move to new rally highs, given the continued solid setups that pop up we still look to make money in line with the overall trend.  In a play off of President Reagan’s ‘Trust but Verify,’ we have to say ‘Play but Caution.’