What we learned this week — stocks are still in a bull market and buy the dip still works

It may not be obvious amid the screaming headlines — about currency manipulation, Fed jawboning, Russia summit, yuan weakening, etc. — but U.S. stocks continue their low-volatility, bull-market grind higher.

The 2,800 level on the S&P 500 has been bested three sessions in a row on a closing basis — and is on pace for a fourth. That level is acting as a floor during pullbacks today and on Thursday. The longer 2,800 holds, the louder bulls will get about a path being cleared to make a run-up to challenge the old highs reached in January.

We also learned this week that Netflix's plunge be damned, buy-the-dip is alive and well as a trading strategy. That resulted in the Nasdaq Composite and S&P Tech indexes setting record highs, while the S&P Smallcap 600 index ventured into all-time high territory, too. When both small and large cap parts of the stock market are stepping higher, it's a sign the breadth of the advance is broad, and therefore healthy. Note that the S&P 500 cumulative breadth index set another record Wednesday. Further, two of the four FANG stocks are flat to lower this week – so they don't get much of any credit for the market's modest gain. Instead, JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. alone account for nearly all of the S&P's small advance.

The early days of second quarter earnings season show fundamentals are holding up. Ninety per cent of S&P 500 companies are beating analysts' 2Q earnings expectations, according to Bloomberg's tally. EPS growth is a slower than expected 20.5 per cent, though it's supposed to accelerate to 22 per cent once energy companies make their large contribution. On the top line, 2Q revenue growth clocks in at a robust 9.5 per cent (the expectation is for 9 per cent when all is said and done). Sometimes it's easier to keep it simple: the trend is still your friend, no matter what the day's bombastic headlines say.

The S&P 500's push above 2,800 this week comes amid a smaller contribution from technology stocks in June and July. Consider:

From the start of the year through the end of May, nine of the top ten point contributors to the S&P 500's gain were technology stocks (that includes Amazon and Netflix even though they're in the consumer discretionary sector) and accounted for 231 per cent of the S&P's 32-point gain, according to Bloomberg's historical mover function. Since the start of June through yesterday's close, six of the top ten point contributors are in tech, yet they only account for 29 per cent of the S&P's 99-point gain.

What's changed is the breadth of the advance. Through May 31, there were more decliners than advancers on the S&P 500 (267 versus 246), so tech stood out like a sore thumb. But since June 1, advancers outpace decliners by 2.6:1 (raw numbers are 371 to 140). Less technology dominance means more space for other industries, and that in turn gives equities a firmer base off of which to work higher, or at the least to limit any potential future decline.