Market Comment: For those investors who thrive on volatility, this market has been a thing of beauty. For the rest of us poor souls, the volatility in the stock market has become nauseating leading many investors to make long-term decisions on short-term emotions, which, in my 30 years in the investment business, has never been a recipe for success. Even though the market’s performance is relatively flat for the year (the YTD performance for the S&P 500, the DJIA, and the NASDAQ Composite is -0.43%, -0.22%, and 1.23% respectively), sentiment indicators are portraying extreme pessimism from investors in magnitudes that are typically associated with climax lows in bear markets. In the case of the Arms index, it recently reached levels that were so extreme, that the closest comparison is October 19th, 1987. While we are not throwing caution to the wind, we do believe that the weight of technical evidence gives us more confidence that we have seen the low. Both the S&P 500 and the NASDAQ Composite registered double bottoms on June 8th and for the most part have been trending higher ever since. In addition, on June 15th, the major indices closed convincingly above their 200-day moving averages for the first time since May 21st, which signifies the early signs of a change in trend. Individual chart patterns have improved nicely over the last week, but not enough to make a significant bet on the long side. We recommend adding capital to stocks with good charts on weakness if the S&P 500 retreats to the 1,060 level or if the NASDAQ dips down to the 2,200 area. While the stock market may need to consolidate recent gains around these levels, I believe the next major move will be higher.

Sector Comment: The Information technology sector continues to lead the market, particularly by the information technology hardware group. The leading sector within the information technology hardware group is the semiconductor manufacturers. Computer software remains solid with the best action in the computer software enterprise group. The consumer sectors appear to be breaking out after a period of consolidation. This group is led by the retail-leisure products sector. The apparel-shoe manufacturers are also strong. The natural resource group is mixed as the mining-gold and silver stocks are breaking out while the oil and gas related sectors are underperforming. The healthcare group is still mixed. Click here to read more.