Market Update July 2014 – Onward and Upward

 

Continuing onward and upward!  And even though the Dow Jones Industrial average crossed 17,000 this week, we believe it will be much more important to see the S&P500 rise above 2000.

Since the beginning of the year, we’ve felt the market bias was positive and would reward those who had the patience to sit through the slow times.  After a year like 2013, when you only needed to show up to make money, it has been hard for investors to sit and wait for the next leg up.  However, those who have been patient (as we have been), are finally being rewarded for that patience.



The notables so far this year have been:

• The NYSE Advance/Decline line has been showing great strength with no signs of slowing.
• Majority of strength has been in the Utilities, Energy and Technology sectors.
• Interesting shift from Small Cap to Large cap (opposite of last year).


We also think it interesting to note that it seems the general public is totally missing this rally. The majority of the run-up has benefited the institutional traders. This actually makes us optimistic about the overall market continuing the up-trend. Why? The market doesn’t usually reverse its course until the last guy to the party (the retail investor) shows up.


To illustrate this point – In the past few weeks, investors have been telling us that there is a lot of buzz about the Middle East right now. Friends and colleagues are wondering if they should get into Energy (oil, gas, etc). We like to note that several of our strategies had moved into Energy around May 1st, thereby participating in the run-up over the past several weeks. Getting in to Energy now, when it is finally being noticed by the investing public, may be a sign that the sector’s run is nearly over. Only time will tell.