Strong close brings new 2009 highs to markets

Stocks zigzagged but couldn't make up their minds. Dow squeaked out another gain, this time 33 with help from buying at the close, for a new 2009 high, advancers ahead of decliners 4-3 while NAZ was up 2 to another 2009 high. In this flattish market, banks were strong, taking the Financial Index to a new 2009 high. Even Citigroup (C) participated, up 7¢ to 3.25.

S&P 500 FINANCIALS INDEX

Value 183.26

Change 3.71

% Change 2.1%

S5FINL:IND




MLPs are digesting gains pretty well. Their index is showing up 1¼ to the 3 49s (even though it closed in the 351s yesterday). MLPs continue as one of the strongest groups this year. REITs caught fire, the Dow Jones REIT Index was up an eye popping 7½ to the 151s where it started 2009. Junk bond funds keep attracting buyers, up again to new 2009 highs. Treasuries were weak with the 10-year Treasury bond yield rising another 4 basis points to 3.68%. The combination of rising prices for high yield securities with lower prices for the Treasury bond narrows their yield spreads. For example, the MLP index yield is only 450 basis points above the Treasury yield (compared with 2-250 being a more common spread in the past). Oil, which has been on fire, slipped pennies, still in the 71s near its 2009 highs.

Alerian MLP Index --- YTD




Dow Jones REIT Index --- YTD





Risk & risky investments are being purchased. This is part of the reason for the weak dollar. While the ¥ has been holding at 95 to the dollar (but strong relative to the recent past), the € is up to $1.44. A secondary currency which I watch is the Australian dollar which has risen to 84¢, shooting up from 65¢ in Mar. Risk is being rewarded.

American Dollars to 1 AUD



Source: http://www.x-rates.com/d/USD/AUD/graph120.html


Whether buying currencies or buying stocks, investors are buying with little attention being paid to risk. When markets get very overbought, as they are now, it should be time to worry. But bulls point to the saying that "The trend is your friend."

Dow Jones Industrials --- YTD