Earnings Keep Stocks Near All-Time Highs


Solid earnings reports have countered uncertainty related to strife in Ukraine and the Middle East, keeping the major averages near all-time highs. The Dow Transports, helped by strong results from airlines and railroads, have been particularly impressive.

Shares of small and midsized companies have been under pressure, and a rebound above the early-July highs in the S&P MidCap 400 and S&P SmallCap 600 indexes would be a bullish near-term development. Small and midcap stocks tend to be especially sensitive to expectations for the economy, so improved relative strength among such secondary stocks would confirm recent strength in transportation and other economically sensitive groups.

While a near-term spurt in either direction would not be surprising, we are inclined to view any correction as a buying opportunity. With the primary trend clearly bullish under the Dow Theory, we are maintaining a nearly fully invested posture. For now, our buy lists have 94% to 97% in stocks.

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