ChartSmarter Thursday Game Plan 1/8/15

Markets rejoiced for a change Wednesday as the averages let out a sigh of relief. Volume was lacking energy, but price action was concrete. Both the Nasdaq and S&P 500 rose in the neighborhood of 1.2% and the bears were disheartened for a day after thinking an early morning jump was just what they would have like to have seen. Bear markets produce early gains which will then fade into the close. After a late morning sell off the bulls took charge and the benchmarks traded in a tight range the last 4 hours, stubborn to give anything back. Every major sector rose Wednesday but retail and homebuilders were among the leaders. Even the lowly regarded JCP rose by more than 1/5 in value Wednesday after a strong holiday season was reported. Of course the stock still remains 30% off recent 52 week highs, and it is best to always stick with best if breed names in a group like a BURL, RH, BBBY, JWN or NKE. That being said it seems investors still have an urge to reach for yield with REITs and utilities performing well. Recall that utilities were among the best performing group in 2014. They have a couple of important backwinds fueling their growth. One is the obvious need for income with 10 year treasury yields sinking below 2% and many thinking the Fed will begin to raise rates sometime in 2015. Utilities are also relying more on natural gas with its abundance here driving down prices significantly. Crude prices have done the same thing although it has been more recently. Will they continue their torrid pace this year? Who knows and one has to ask themselves if they are more concerned with absolute or relative performance. With their dividends they may not give you that big growth move they did in ’14, but if the market turns tail they will most likely fall much less then the higher beta groups.