The beat goes on, as markets continue their slow grind higher. Dow Industrials are higher for the tenth consecutive session, and current sit near a new all-time high. Likewise, the Russell 2000 is currently at an all-time high. While these two indexes continue to impress, the S&P 500 is a stone’s throw from its all-time highs, but the Nasdaq has some serious catching up to do.
Currently, the Russell 2000 is leading markets higher today, up 0.6% on the day. The S&P 500 and Dow are each higher by about 0.3%, while the Nasdaq trails all other indexes, up a modest 0.2% today. Despite continued equity strength, bonds have held their bid relatively well this week. Today, they are off only 0.1% on the day. Metals are near flat on the day, but miners are seeing a strong bid, up 1.3% on the session. The grinding price action is killing volatility, as VIX made a new intraday multi-year low. Currently, that Index is off 2% for the session.
CHART OF THE DAY
Zynga (ZNGA) – ZNGA is involved in the social gaming space, and the stock has been a graveyard for money since its IPO in late 2011. However, there have been some positive developments in the online gaming space, and ZNGA is poised to take advantage of that opportunity should some favorable legislation develop. The shares recently bottomed near the $2 level, and the chart looks constructive from a risk/reward perspective at this juncture.
On the sentiment front, bears have recently come out of the woodwork, as short interest has nearly doubled in the past month. Should ZNGA continue its recent trend higher, this creates an increased potential for a short-covering rally,which could be very strong given the recent glut of new bearish positions. I like an entry here with a stop placed on a close below 3.50. I would initially target the 4 level, with 5 being a stretch target.
WHAT I’M EXPECTING
A test of all-time highs on the S&P 500 next week. There is an FOMC meeting on Tuesday and Wednesday, and the days leading into these events are typically very bullish. Given that we’re only about 1% off these highs, a rally into that level seems very likely. From there, it’s tough to say what will happen.