The world's a nicer place in my beautiful balloon

It wears a nicer face in my beautiful balloon

We can sing a song and sail along the silver sky

For we can fly, we can fly

Up, up and away

My beautiful, my beautiful balloon

-The Fifth Dimension  

Once again, transportation stocks were the key for the market. They represent the growth of the economy, greater demand for goods, and a return to travel as the nation and world reopen. The Dow Jones Transportation Index (DJT) looks like a rocket ship launch. 

It is the kind of move that brings together hot momentum buyers and old-school Dow Theory investors.  Historically, when transportation leads, it corroborates the perfect proxy for future economic growth.

DJT

Market Breadth

The internals improved nicely. Also, there were still a lot of new lows on the NASDAQ Composite, and the overall volume was very light. I cannot remember the last time there was only 405 million down volume for the NASDAQ.

Market Breadth	NYSE	NASDAQ
Advancing	2,613	3,303
Declining	712	905
52 Week High	228	101
52 Week Low	41	89
Up Volume	3.39B	3.54B
Down Volume	459.94M	405.45M

Buying the Dip

It was all about rebounds and buying the dip, as the reopening trade picked up steam, coinciding with a downturn in Covid-19 hospitalizations. Investors are using the recent decline in Goldman Sach’s (GS) reopening model to buy the corresponding dip in the stock market.

Sector Watch

Ten out of eleven S&P 500 sectors finished higher, none more impressive than Communication Services that were slammed most of the day and led lower by Netflix (NFLX).

S&P 500 Index	+0.93%
Communication Services XLC	+0.17%
Consumer Discretionary XLY	+1.33%
Consumer Staples XLP	+0.50%
Energy XLE	+1.27%
Financials XLF	+1.39%
Health Care XLV	+1.18%
Industrials XLI	+1.37%
Materials XLB	+1.82%
Real Estate XLRE	+0.45%
Technology XLK	+1.01%
Utilities XLU		-0.84%

The VanEck Vectors Semiconductor (SMH) Exchange-traded Fund (ETF) is in the perfect trading channel and putting on a technical clinic:

• The channel keeps holding on to the top and bottom.
• The index pulled back from the double top.
• The index held and bounced off its 50-day moving average.

What’s always interesting with charts and formations that telegraph moves are often fundamental news that goes hand in hand. Semiconductor names popped on earnings from ASML Holding (ASML) and upgrades for key names in the industry. 

Key names in the SMH include:

• 14.80%: Taiwan Semiconductor Mfg. Co. (TSM)
• 8.30%: Nvidia Corporation (NVDA)
• 6.18%: Intel Corporation (INTC)
• 5.74%: ASML Holding (ASML)
• 5.07%: Texas Instruments (TXN)
• 4.92%: Lam Research (LRCX)
• 4.85%: Broadcom (AVGO)
• 4.84%: Qualcomm (QCOM)
• 4.76%: Applied Materials (AMAT)

Keep an eye on the chips, which in many ways, are a modern-day transportation index. Instead of cargo, they facilitate the transportation of information, which is the biggest part of the modern economy.

The index breaks out with a close above 359, hopefully with better-than-average volume.

Portfolio Approach

We added to Materials yesterday in our Hotline Model Portfolio.

Today’s Session

It’s another quiet pre-opening period for the market.  The big event in Washington will see President Biden pledge a 50 to 52% reduction in US greenhouse gas emission from 2005 levels to 2030.

There will be a big push on electric vehicles, but most of the pure plays in this space aren’t moving much ahead of the opening bell. 

Good news on employment, as initial jobless claims dropped more than expected.  But I am very worried about the total amount of folks getting benefits now.  The read is two weeks behind, but at this point, it should not be increasing.

There are going to be some serious ramifications from these programs being abused. 

• Pandemic Unemployment Assistance 7,303,604 +265,228
• Pandemic Emergency 5,605,935 +447,704

 

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