Investors are pouring cash into the big U.S. industrials - especially those that have been laggards or are facing problems.
The leading stocks on the Dow Jones industrials Monday include Boeing Inc. (production delays), Caterpillar Inc. (weak capital spending), General Electric Co. (financial woes) and the beleaguered drug sector with Merck & Co. and Pfizer Inc. Also among the top performers Monday is Kraft Foods Inc., which is in the midst of a hostile and potentially expensive takeover offer for Cadbury PLC.
"It's the oid story" said Ron Meisels, a technical analyst with Phases & Cycles. "Markets climb a wall of worry."
Many portfolio managers in London and Toronto have remained on the sidelines and now new cash is coming into the market, he said. "People recognize that the year-end is coming and if they show a huge cash position at the end of the year, they know that is not what they are hired for."
Sitting on the sidelines and waiting for a correction has been a costly exercise, Mr. Meisels said. "Our indicators suggest there is further upside potential for the time being in the U.S."
Health care and industrials should continue to perform well. "If they didn't knock [the stocks]down, they probably will go up," Mr. Meisels said.
While the U.S. banks continue to struggle compared with their Canadian peers, that sector still faces a lot of technical consolidation, he said.
The Dow Jones industrial index rose 1.5 per cent, or 157.65 points, reaching 10,428.05 Monday afternoon, a 13-month high.
The S&P/TSX could be relatively more quiet in the future as a result of sector rotation by investors among banks, oil and gold.