Major averages rose yesterday on mixed volume while leading stocks continue to lag. The QE-train has certain groups such as the oils and other commodities disembarking the train early such that the freed up QE-money has to find a new home so it then moves into other groups, keeping the major indices in an anemic uptrend. This manufactured musical chair market is like passing around a hot potato where the cancer has metastasized so it's only a matter of time until it greatly impairs the organism. That said, we must remember that cancers can co-exist within the organism for far longer than doctors would normally expect, thus as long as QE is at the ready, levels of QE as shown in yesterday's PMP chart can continue to push major averages higher.
Note that rallies tend to be short lived in this QE environment such that investors are better off selling into strength since even a small pullback in the major averages can reverse stock profits within a few days or less. At the very least, unless one is using a longer term approach such as the 7-week sell rule, stops should be kept tight in this environment so at least no serious losses are incurred.
Home hardware retailer Restoration Hardware (RH) had a pocket pivot off its 50-day moving average. Earnings are soaring, group rank 42.
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