Though the major averages provided few fireworks last week, the majority of major averages did post solid. There were a number of individual stocks that did post significant gains for the week as it continues to be a stock pickers market. For those who do not closely follow the markets, the price action in the averages obscures what is happening in many stocks.
There were also a number of losers, with the airlines stocks dropping sharply last Wednesday as former market leader Southwest Airlines (LUV) was down over 10% for the week. The series of new closing highs in the S&P 500 has many of the TV pundits confused. As I stressed in 5 Mistakes to Avoid for the Rest of 2015, changing you investment plan based on any media sound bites is a prescription for disaster.
I was pleased that Jeffrey Gundlach, who manages $64 billion in the bond market, seems to feel the same way (Beware of CNBC Pundits). He does not have a high regard for their interest rate analysis, "The commentators on CNBC “don’t get it” Gundlach said, in regard to statements that the recent spike in interest rates was due to fears of Fed tightening."
As I noted two weeks ago Are These Key Markets Changing Direction? investors bailed out of equity funds in April and its getting more difficult to find a market bull. The latest posting on the wall of worry is the realization that the Dow Transports have failed to make a new high with the Industrials since last November.
The longer-term chart I published on Friday points out that earlier in the bull market the Transports diverged for 21 months before blasting off to the upside. I have yet to see this cited in the press. Certainly, I would be more bullish on the market if the Transports were also making a new high, but there are no warning signs yet of a major correction.
The weak economic numbers so far in 2015 have discouraged many investors from buying stocks as according to AAII only 25.2% are bullish as 50% are neutral. This is bullish in my opinion, especially when combined with the generally low public participation in the stock market.
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