Eleven of the past twelve market days have seen the market move higher . . . generally to new all-time highs. The S&P 500 closed today at 1695.53, yet another new high.

Could the upward run continue?  Yes, it could and likely will for at least three reasons.  1) Funds continue to flow from money market and longer-term fixed income funds into the equity market; 2) valuations have not exceeded reasonable variations from the norm—a tad high here and there but with bargains remaining; 3) the gains have not been powerful, large up days on large volume indicating a blow-off top.

Where is the market looking for opportunities? 

The market opened on positive note this morning after generally positive performances by Asian markets (Japan was closed for a holiday) and a good start in Europe. This carried forward the positive momentum of the five-day up market last week and a seven-day overall winning streak, with both the DJIA and the S&P 500 reaching new all-time highs.

The beginning of Q2 earnings season got off to an inauspicious start with Alcoa (AA) barely beating highly reduced estimates by a single penny per share. Alcoa’s CEO provided cautionary but optimistic guidance on CNBC after the market closed. AA’s shares initially climbed a bit in the aftermarket but have since given most of that back.

Returning to last week’s thesis, which was that if the plethora of economic reports last week’s were good to okay, S&P support levels would hold and the market rise on the flow of funds from recent long bond sellers.  I do think this indeed happened.

Why?  Here are several supporting reasons:

Clearly, the rapid exit of dollars from the fixed income market has not yet translated into a rapid flow of dollars into the equity markets, but equities is where much of those funds will likely end up, given the rising risk of bonds. It is really a case of “who blinks first.” Assuming the stock market holds near the current support levels, it is our opinion that the bond contingent who have sold or will sell their bonds will blink first by purchasing equities.

The market responded well today to good economic news and to the positive and somewhat surprising response to the election of a moderate Iranian President.  Some moderation in Turkey didn’t hurt either, and overnight positive markets in Asia and Europe gave bullish investors enough encouragement to buy equities broadly. We think it likely that this week the market will challenge highs that were set in late May.

Despite today’s roller-coaster market, the market ended up essentially flat. But questions abound. Will interest rates start rising now in a meaningful way? Will the European courts find yet another way to derail the country bail-outs? Will Asian issues result in something positive for our markets, or will Asia continue to vacillate on most matters? Those questions remain to be answered. In the meantime, we’ve found four stocks that may be right for this market, one in the Technology Sector, one in Financials, and two in Consumer Cyclicals. 

The week started sluggishly with a little positive kick at today’s closing. All three major indices closed in slightly positive territory, despite spending most of the day in the red. Volume was decent for this time of the year.

We think it is significant that the markets closed up, since two of today’s economic reports were both below expectations. The ISM manufacturing index fell below the sacrosanct 50 level, compared to last month’s 50.7, and construction spending was up from last month’s weak -0.8%.  Auto and truck sales numbers, coming in this afternoon before the market closed, were better than expected, with 15.3M vehicles versus last month’ s 15.2M and an expected 15.25M.

Surprise!  The market roared ahead this morning with all three major domestic indices up at least 1.5%. The move was triggered by a weekend with little negative economic news domestically and globally.  Then this morning, an impressive increase in Consumer Confidence to 76.2, which was not only well above last month’s 68.1 and the projected 72.5 but also a 5-year high, provided investors something to cheer about.

So, what did the market want today?  Nothing it appears.  It traded on weak volume and had very little movement.  This morning the market hated commodities especially silver, but by days end, the market liked silver, gold and even oil but not the dollar.  Why?