When performing magic tricks it is said that the hand is quicker than the eye. On Wall Street, however, it could be argued that the market is quicker than the hand. Meaning that the swiftness and shallowness of any decline in stock prices lately has made it almost impossible to react fast enough to find a cheaper way into a red hot market.
"It does appear as though that chill (from last week's 7% plunge in Japan) was temporary," says Peter Kenny, managing director at Knight Capital, in the attached video. He credits dual commentary from the ECB and Bank of Japan for sparking the global return to risk assets this week.
Statistically, last week's one percent U.S. market decline marked the first negative week in the past four, and it is worth noting that, as Jonathan Krinksy, chief technical market analyst at Miller, Tabak & Co. points out, the S&P 500 has not had back-to-back down weeks since the November trough.
At the same time, another market streak is in the spotlight today. Specifically, traders are watching to see if the Super Tuesday trend will continue for a 20th week of Tuesdays being positive.
Beyond that, traders like Kenny are positioning themselves for continued upside, led by cyclicals.
"That trend will likely continue," he says. "The necessity for a defensive posture, which most people have over-allocated to, seems to be becoming something of the past as people are looking to catch up with the indexes," he adds, mindful of the flight from defensives that has coincided with it. And nowhere is that more apparent than in the Utilities (XLU), which has shed a market leading 7% so far this month.
- Peter Kenny