Investment Capitalist

The US Economy, according to the behavior of key market sectors, is on an absolute tear and within six to nine months, the data is going to be screaming “expansion” at a breakneck pace. Bond market behavior over the past several weeks suggested the same except the talking heads tried to rationalize it as “bond vigilantes” wreaking havoc on the President’s fiscal policies. A monkey could have rationalized better than them.

And those taking credit on for “sending a signal” to sell Oil around early June?  One day before an upside explosion that is about to go parabolic. Well, ask yourself who it was giving the signal, and whether or not that “analyst” should even be passing judgment on macro data sets.  We all know daytraders sell a monster bull market at the first sign of weakness. Then quickly realizing their error, they jump back on the train like a monkey chasing a banana boat. No different than the sell-side analysts fresh out of school and green as a cricket.

Moving on…

Nasdaq breaking out on rising volume. All momentum and breadth indicators confirm this is real. Big cap tech has been leading the way, so don’t be surprised to see the generals outperform.

S&P 500 could break away from here, but experience tells me there may be at least one, perhaps two, head fakes designed to drive daytraders and weak-handed swing traders absolutely batty.

Commodity stocks possibly near a short-term top though. Only caveat here is the greenback. There has been a monster dollar rally which began in the early morning hours of Wed. June 4th. After a temporary pause mid-day Thursday, the Greenback exploded again in overseas markets. For us equity bulls, we want to see continued weakness in the Yen/Dollar cross, and strength in the Euro/Dollar cross. If the dollar can just stabilize, equities will rally as a group. If the dollar collapse resumes, we’ll see commodity stocks go into overdrive as the short interest is most definitely building up because of the speed of the rally. Watch big-cap tech run and you’ll be disappointed you don’t own a chunk of this group.

Focus on the following sectors:

• Building materials
• Casinos
• Coal
• Footwear
• Internet commerce & services
• Specialty semiconductors and equipment manufacturers.