Monday and Tuesday seem to be confirming that the blow-off last week was largely emotional, as we speculated in our Letter dated February 1. Earnings news continued good as did economic bulletins on Monday and Tuesday.

To those who think the economy is terrible, that the market is overbought and must go down, the news keeps chipping away at their beliefs. Traders throw up their hands and buy, not expecting the rally to last.

The catalyst was housing starts were slightly higher, in line with forecasts. This news ramped up real estate and homebuilders today.

The top Tracking Table funds on Tuesday were JRS, up 5.31%, XHB, USL, XAL, RQI, and PKB, all up over 2.5%. JRS and RQI are real estate, PKB is homebuilders.  

The rally was very broad, about 80 funds went up. The only ones that fell were SLV, HHH (internet), AOD (yield), UUP (dollar), TBT(inverse LT bonds), GMF (Emerging Pac Asia), and KRE (regional banks). RKH, the other regional bank funds was week, but higher.

Regards,

Paul Accampo

Editor, The ETF Letter

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