Higher volume powered another move to new highs by the major market averages in a continued steepening of the market's ascent. Industrial production, homebuilder sentiment and manufacturing data all came in weak yesterday, yet the market dismissed the bad news and continued higher, a sign that the bulls are firmly in control. Furthermore, economic weakness makes a Fed exit from QE less of a possibility.
Apple (AAPL) broke down back through its 50-day moving average yesterday on heavy selling volume as news of Google (GOOG) starting up its own streaming music service, along with talk that AAPL's return on capital is declining rapidly and thus justifies a price more in the range of $240-s-share. GOOG meanwhile, gapped up and cruised through the $900 century mark level on heavy buying volume. Gold and silver are rolling over in what appears to be an impending test of their recent lows. Investors needn't concern themselves with this action until the precious metals show some concrete stabilization and new buy points. For now, it is enough to steer clear of the metals and focus on leading stocks, of which there are almost too many
After-hours yesterday Tesla Motors (TSLA) announced a 2.7 million share secondary offering and that the founder and CEO of the company, Elon Musk, has made a preliminary offer to purchase up to $100 million worth of the stock, about 1.2 million shares. TSLA is set to gap up this morning as a result of the news given that Musk's desire to purchase shares is a stunning vote of confidence in his company and the potential for the stock to move much higher.
As the market goes somewhat parabolic, the odds of a pullback obviously increase, but investors would do better to focus on the action of leading stocks as the breadth of leadership expands. A market pause might occur in the form of a pullback, or it might just result in a period of tight sideways action as the market digests its strong gains so far in May. Meanwhile, the Market Direction Model remains on a buy signal.
3-D printing stocks are pulling back this morning after one brokerage firm downgraded the stocks, claiming that they are "waiting for expectations to align with reality." We would tend to look at such a pullback as buyable given that the stocks, such as 3-D Systems (DDD), have been on a straight-up trajectory and are due for some backing-and-filling. Any pullback by Stratsys (SSYS) down towards the top of its recent breakout at around 87 would also offer a nice place to pick up shares, in our view.