Up, Up, and Away

03/24/2010 12:00 pm EST

Focus: MARKETS

Mark Leibovit

Chief Market Strategist, VRTrader.com

Mark Leibovit, chief market strategist of VRTrader.com, says the market ignored the enactment of health care reform legislation and looks like it’s moving higher.

The passage of the most sweeping US health-care legislation in four decades removed uncertainty surrounding the prospects for pharmaceutical and health-insurance companies under President Barack Obama's biggest policy initiative.

The [subsequent] advance in US stocks halted an earlier global slide triggered by India's unexpected interest rate increase last week and an International Monetary Fund official's prediction that government debt may hurt economic growth in developed economies.

Monday’s resiliency was impressive, especially as markets were weak overnight and opened on big downside gaps.

Though the market recovered well following early weakness, we have yet to see new highs (my forecast 11,300-11,500 in the Dow Jones Industrial Average), which are inevitable whether they come this week or following a still-needed correction.

The bill passed by Congress and [signed by the president] requires each person to purchase insurance if they don't have any already, thus drumming up new business for insurers and health providers. Health care stocks had done poorly when the public option was being discussed, but without it, [insurers] stand to benefit from the addition of 20 million new customers. Drug companies also stand to benefit from the increased demand.

Health-care stocks in the Standard & Poor’s 500 advanced 0.6% as a group [Monday], with Pfizer (NYSE: PFE) and Bristol-Myers Squibb (NYSE: BMY) climbing at least 1.4%. (They both closed higher Tuesday—Editor.)

[On Monday,] the bull market rally continued among the S&P sectors, with two of them hitting new bull market highs: consumer staples [and] consumer discretionary [stocks]. (Both continued their rally Tuesday—Editor.)

Technology also outperformed, hitting a 2 ½-month high and trading just 1% from the bull market high set in January.

Semiconductor capital-equipment companies soared after Pacific Crest Securities Inc. said their valuations are attractive. KLA-Tencor  (Nasdaq: KLAC) and Novellus Systems  (Nasdaq: NVLS) rose more than 3%, leading an index of chipmaker stocks in the S&P 500 up 1.6%. (Those stocks closed up Tuesday as well—Editor.)

Materials stocks were the best performers [Monday,] even though precious metals fell. [And although] crude oil prices recovered by the end of the trading session, energy stocks were unable to recover their [early] losses.

With that in mind, I am still on my Timer Digest Buy signal anticipating much higher prices ahead. I am still anticipating a move to 11,300-11,500 and perhaps higher in the weeks or months ahead. (The Dow closed above 10,888 Tuesday.)

But as always, I let the market tell me what it wants to do, not what I want it to do! A sharp sell-off would be gift to traders, unless the volume is extraordinarily heavy.

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