Another Week Of Record Highs On Wall Street


Economic data is mixed

The Producer Price Index (PPI) and Consumer Price Index (CPI) reports were weaker-than-expected, but while the mild price pressure could indicate demand-side weakness, the relatively low inflation makes the Fed’s position easier amid the global economic weakness.

As the major indices all closed at record highs on Friday, the technical picture remains bullish across the board, and the key trend indicators confirm to support the bullish case on Wall Street. The S&P 500, the Nasdaq, and the Dow are well above their rising 200-day moving averages, and the benchmarks also remain above their steeply rising 50-day moving averages. Small-caps had a very strong week, with the Russell 2000 advancing four days in a row before Friday’s slight dip, is still above its short- and long-term moving averages. The Volatility Index (VIX) erased tits Iran-spike and finished the week at its year-to-date low near the 12 level on Friday, as investors continue to be hungry for risk.

Market internals improved significantly thanks to the rally in small-caps, and the most reliable breadth measures all continue to confirm the ongoing bull market. The Advance/Decline line surged to new bull market highs yet again, as advancing issues outnumbered decliners by a 5-to-1 ratio on the NYSE, and by a 6-to-1 ratio on the Nasdaq. The average number of new 52-week highs jumped higher on both exchanges, rising to159 on the NYSE and 154 on the Nasdaq. The number of new lows edged lower, falling to 10 on the NYSE and falling to14 on the Nasdaq. The percentage of stocks above the 200-day moving average hit 72.5% on Friday, finishing the week above 70% for the first time since mid-2018.


What comes after record highs?

Short interest continued to collapse on Wall Street, leading to spectacular short squeezes in stocks like Tesla (TSLA), as investors are facing less political and economic risks thanks to the positive developments of the recent weeks. Planet Fitness (PLNT) continues to flirt with its all-time high from last year, and with its short interest still being above 70%, the stock is a strong candidate for a short squeeze. Match Group (MTCH) is also sporting a very high short interest of 58%, and it got very close to its record high this week as well. Our previous pick, Hormel Foods (HRL) finally broke out to a new high this week, following over a year of consolidation and the stocks very high days-to-cover (DTC) ratio of 19 means that shorts could fuel an epic rally.

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