The February 2013 Rally May Not Be Over, Month End Analysis:
The February 2013 rally still has legs and is part of one of the most underrated, unloved stock market rallies of all-time. Most managers missed the rally all of last year and some were quick to short it when relative strength indicators for the major averages were still strong. It looks like equities will end the month on a rather positive note after giving back much of the gains about a week ago.
Positive economic data helped the rally yesterday and Fed Chairman Ben Bernanke testified today using statements that were viewed positively by the market. Bernanke says unemployment won’t fall below 6 percent until 2016 and we are inclined to believe him. Our economic models showed unemployment could trend near 6 percent by year’s end but after a slow 2012 fourth quarter, possible sequestration starting Friday and lackluster initial jobless claims, we may push back on our own yearly prediction for the first time ever.
The Dow Jones Industrial Average rose 175.24 or 1.26% to 14,075.37 as traders let go of notions that QE would be over soon which quelled the rally last week. The Dow looks more likely to make an all-time high if the economic data continues to be decent. We are neutral with a less defensive posture and felt yesterday that the dip from the prior day was a buying opportunity. If follow-through occurs tomorrow, we could hit the new high in the next couple of days.