Is the Stock Market “Melting Up”?

NYSE: SPY | SPDR S&P 500 ETF Trust News, Ratings, and Charts

SPY – The last few weeks the S&P 500 (SPY) has been beset with wild sector rotation. That is still at play. However, another trend may also be emerging that deserves some conversation. That is the notion of a market “melt up”. What is that? And what does it mean for our trading strategy? I will answer that and more in this week’s commentary. Read on below to find out more….

First off, I want to make sure that you watch our Members Only Webinar recorded yesterday. There I provided my market outlook for the second half of the year and what it means for our trading strategy.

Indeed it was spending time over the weekend putting this webinar together which led to the portfolio overhaul and 6 trades made on Monday morning. So this is important ground to cover as it sets the paces for how we should trade in the months ahead.

All in all I cover:

  • Bull Case
  • Bear Case
  • Verdict & Year End Target for S&P 500
  • Trading Strategy to Outperform
  • Portfolio Review of our 12 stocks and 2 ETFs
  • Q&A

Watch Webinar Replay Here >>

Back to today’s market commentary and what I mean by a market “melt up”.

Think of a melting candle.

Drip, drip, drip.

It is a very slow process that doesn’t seem like much at first, but over time the candle will be fully consumed. Now let’s translate that to the stock market. Instead of melting down…it melts up by little drips and drabs. Almost imperceptible at first having you doubt that a breakout has occurred. And then one day you wake up and see the market is pressing 4,300 and indeed the breakout above 4,200 was already in full swing.

One of the other hallmarks of a melt up market is that it never really goes down by any great amount. Plus its gains accrue at such a slow pace you don’t really see it happening til potentially it’s too late.

Now with that in mind here are the closing prices on the S&P 500 the past eight sessions:

4,227.26

4,226.52

4,229.89

4,192.85

4,208.12

4,202.04

4,204.11

4,200.88

That drop to 4,192 a few sessions back is no doubt lingering in many people’s minds to have them question the very real possibility that the break above 4,200 has already taken place. Indeed I was getting caught up with all the sector rotation games, which originally prevented me from seeing that indeed a breakout is likely unfolding.

Not absolutely, positively unfolding. Just more and more likely.

And that increased likelihood is what had me jump back to 100% invested Monday with a slate of fresh trades. Because I think the odds of the melt up style breakout is under way and thus wanted to be fully loaded with attractive stocks.

On the economic front there was some quality bullish fuel being served up. That starts last Thursday with ISM Services coming in at 64 which is nicely above the 62.7 from the Previous report. There is just shockingly no let up in the strength of this report. Ditto for its cousin, ISM Manufacturing.

On the jobs front we first saw an impressive 978,000 jobs added in the ADP Employment report for May. That was more than 60% above estimates.

However, investors focus more on the Government version of the report which came out Friday showing 559,000 jobs added. Still impressive…just not as splendiferous.

Most interesting of that Government data set was the decline of the unemployment rate from 6.1% to 5.8%. Rarely will you see that big of a move in just one month’s time. Thus, it tells you how quickly the economy is getting back on track.

Then today was a curious showing for the NFIB Small Business Optimism index. It slipped modestly from 99.8 to 99.6. This was strange after 3 straight months of marked improvements.

The reason why?

Because small business owners are complaining about labor shortages. Meaning they DEMAND to hire a lot more people…but there is not enough skilled labor to go around.

This is good and bad.

The good part is that the employment rate should continue dropping and that means more income and spending by consumers and businesses alike to lift the economy. The bad part is that if there is a labor shortage then you will have to spend more to hire the right talent to your firm.

This is called “wage inflation”. Which is a more permanent type of inflation versus much of the “transitory” inflation that seems to be floating around today. We need to keep an eye on this given how rising inflation would put a cramp into the markets long run potential. (For more insights on inflation and what it means for the stock market, then skip forward to 11 minutes and 50 seconds into this month’s webinar presentation).

For now the bull argument far outweighs the bear argument. And thus we press forward with a fully loaded portfolio of attractive stocks and ETFs…

What To Do Next?

The Reitmeister Total Return portfolio has outperformed the market by a wide margin this year. In fact, through the end of May the portfolio has powered ahead by +25.17% on the year which is more than double the S&P 500’s return.

Why such a strong outperformance?

Because I hand-pick the very best stocks from across the POWR Ratings universe—whether it’s a growth, value or momentum play—to bring you winning picks like JCOM, which bought subscribers of Reitmeister Total Return a +75.52% gain in just 5 months!

If you would like to see my latest advice on JCOM and unlock the current portfolio of 12 stocks and 2 ETFs, then consider starting a 30 day trial by clicking the link below.

About Reitmeister Total Return newsletter & 30 Day Trial

Wishing you a world of investment success!


Steve Reitmeister

…but everyone calls me Reity (pronounced “Righty”)
CEO, Stock News Network and Editor, Reitmeister Total Return


SPY shares were trading at $422.87 per share on Wednesday afternoon, up $0.59 (+0.14%). Year-to-date, SPY has gained 13.47%, versus a % rise in the benchmark S&P 500 index during the same period.


About the Author: Steve Reitmeister


Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks. More...


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