"The Big Picture"--IBD:"Indexes Green, But Conviction Still Lacking"
investors.com
>>>Tuesday, August 8, 2000
Indexes Green All Around
But Conviction Still Lacking
Investor's Business Daily
Stocks climbed broadly Monday. But trading volume was suspiciously light for such a feel-good session.
Just about everything seemed to work. Technology shares rose as chip stocks bounced back for the first time in a week. Cyclical stocks enjoyed their best day in almost a month. Small, medium and large stocks all gained.
The Dow industrials added 0.9%, lifting the blue chip benchmark back above its 200-day moving average. That’s a feat the Nasdaq is still working on. The tech-dominated index rose an even 2%, while the S&P 500 delivered a 1.1% increase.
Commentary around Wall Street bubbled bullishly, asserting that investors were now confident the Fed wouldn’t raise rates later this month. (Never mind that the futures markets haven’t changed their outlook of a 25% or so chance of a quarter-point tightening.)
If everything was so perfect, where was the market’s conviction? Volume declined again on the NYSE and Nasdaq to below-average levels. Pundits blamed Friday’s contraction on traders getting a jump on a lazy summer weekend. They apparently extended their stay at the Hamptons on Monday.
Whatever your explanation, the fact is that the market made bigger gains Monday in lighter volume. Recall that during the Nasdaq’s bear market from March to May, rallies in declining or slack volume ended badly. The bear relented only after the Nasdaq rallied in strong volume.
Some strong stocks that had come under pressure bounced back Monday and headed higher.
Sanmina popped out of a two-week consolidation to a new high, jumping 10 7/8 to 108 15/16. The stock was an early leader in the latest rally, and held up fairly well. On Monday, Banc of America Securities raised its price target on the contract electronics manufacturer. That’s the sort of news that tends to spur retail buying, not the institutional accumulation that drives stocks during long advances.
Brocade Communications jumped 6% to a new high in above-average volume. Corning, which struggled with its 50-day average last week, rose 10 1/4 to 274 3/4, just 3% off its high. The fiber-optics stock climbed as high as 284 1/4 but slipped back in the afternoon as trading increased.
Chipmakers put in a solid performance. Cirrus Logic followed through on last week’s breakout, rising 2 to 22 1/2. Broadcom rose 9 to 247 15/16 as it consolidates near its old high. Plexus gained 11% and GlobeSpan 12% as both moved back above their 50-day averages.
Home builders led all groups Friday after Salomon Smith Barney upgraded several stocks, citing the prospect of no more interest-rate hikes. The group has lagged the market for the past two years, but has rallied strongly in recent days and weeks. MDC Holdings shot up 8%, NVR Inc. 9%, Meritage 11% and Pulte 12% as all hit 52-week or all-time highs.<<< |
