S&P 500 Index (SP500)

[DiscoverGold]

Trading Notes: Tuesday, February 2nd
By Brett Steenbarger, Ph.D.

* February 2, 2016

* After early weakness, we continued to move higher on Monday, hitting a new high for the recent rally off the lows. Across all exchanges, we had 502 shares register fresh monthly new highs against 251 new lows. That is a modest expansion from Friday's levels. Oil continues to come well off its recent highs and we've seen selling in stocks in premarket trading. Interestingly, stocks are lower in Japan following the BOJ action and we're down in Europe as well. At least so far, the rally off the lows still strikes me as part of a bottoming process, not a fresh bull market leg.

* Here's a look at one of my primary cycle measures. My base case that this cycle will top out at a lower price high and lead to a test of the recent market lows. Should we see waning breadth on the upside on future strength, that would add credence to this view. As of Monday's close, we were short-term overbought, with over 80% of SPX shares closing above their 3, 5, and 10-day moving averages. (Data from Index Indicators; it's a great site for breadth info).



* A look at sectors from the excellent FinViz site finds that yield-sensitive utility and consumer staples shares have led market performance year-to-date. Interestingly, financial shares are among the largest losers during 2016 thus far. Given concerns over debt--China and high yield--this is not a bullish configuration of sector strength. It's clearly defensive.



http://traderfeed.blogspot.com/2016/02/trading-notes-for-week-of-february-1.html

• George.

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