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Thursday, May 16, 2019 10:14:10 AM
Is The 6 Week Relative Outperformance In Financials Over?
By: Tom Bowley | May 16, 2019
Falling treasury yields put a lid on many industries within financials (XLF, -0.37%), while renewed strength in the U.S. Dollar Index ($USD) kept pressure on materials (XLB, -0.26%). Other than those two sectors, it was primarily a very bullish day. The NASDAQ was the best performing index, gaining 1.13%. There was fairly wide participation, however, as the S&P 500, Dow Jones, and Russell 2000 climbed 0.58%, 0.45%, and 0.34%, respectively. Leadership was felt in communication services (XLC, +2.24%), technology (XLK, +1.09%), and a host of consumer areas. Consumer staples (XLP, +0.79%) and consumer discretionary (XLY, +0.68%) added strength, despite an abysmal retail sales report for April. In fact, a plethora of poor economic reports resulted in the 10 year treasury yield ($TNX) falling 4 basis points to test its March low at 2.36%.
Relative strength in key aggressive sectors is still strong, although there was short-term damage inflicted during the recent trade-war-related selloff:
Keep an eye on those relative strength support levels. Given the high volatility ($VIX) and increase in the equity only put call ratio ($CPCE) recently, I believe the odds are high that we've seen a solid short- to intermediate-term bottom print in our major indices. If the above relative strength support lines fail to hold, that would be a signal that my call is incorrect.
Internet stocks ($DJUSNS, +3.39%) were strong on Wednesday, leading the XLC higher. But there's work to do on this chart if the group continues pushing higher today:
The reversing candle is nice, but it's a short-term signal only. Can we move back through the now-declining 20 day EMA? The PPO has turned negative so that 20 day EMA test will be significant technically.
Pre-Market Action
The 10 year treasury yield ($TNX) has climbed back to 2.40% this morning on the heels of much better economic news and that should help to provide a lift to the financials in particular.
Dow Jones futures suggest a continuation of the recent U.S. equity advance, climbing 95 points with 30 minutes left to the opening bell. Europe is strong this morning as well, so momentum is at the back of the bulls - at least to start the day.
The VIX has declined 4 of the last 5 days and a close beneath 16 would be a signal that the worst is likely over. Nothing is a guarantee, especially given the trade war. We know one headline could mean 500 points on the Dow Jones. The sentiment environment no doubt has improved, though, and that should be viewed as a positive for equities...
Read Full Story »»»
• DiscoverGold
By: Tom Bowley | May 16, 2019
Falling treasury yields put a lid on many industries within financials (XLF, -0.37%), while renewed strength in the U.S. Dollar Index ($USD) kept pressure on materials (XLB, -0.26%). Other than those two sectors, it was primarily a very bullish day. The NASDAQ was the best performing index, gaining 1.13%. There was fairly wide participation, however, as the S&P 500, Dow Jones, and Russell 2000 climbed 0.58%, 0.45%, and 0.34%, respectively. Leadership was felt in communication services (XLC, +2.24%), technology (XLK, +1.09%), and a host of consumer areas. Consumer staples (XLP, +0.79%) and consumer discretionary (XLY, +0.68%) added strength, despite an abysmal retail sales report for April. In fact, a plethora of poor economic reports resulted in the 10 year treasury yield ($TNX) falling 4 basis points to test its March low at 2.36%.
Relative strength in key aggressive sectors is still strong, although there was short-term damage inflicted during the recent trade-war-related selloff:
Keep an eye on those relative strength support levels. Given the high volatility ($VIX) and increase in the equity only put call ratio ($CPCE) recently, I believe the odds are high that we've seen a solid short- to intermediate-term bottom print in our major indices. If the above relative strength support lines fail to hold, that would be a signal that my call is incorrect.
Internet stocks ($DJUSNS, +3.39%) were strong on Wednesday, leading the XLC higher. But there's work to do on this chart if the group continues pushing higher today:
The reversing candle is nice, but it's a short-term signal only. Can we move back through the now-declining 20 day EMA? The PPO has turned negative so that 20 day EMA test will be significant technically.
Pre-Market Action
The 10 year treasury yield ($TNX) has climbed back to 2.40% this morning on the heels of much better economic news and that should help to provide a lift to the financials in particular.
Dow Jones futures suggest a continuation of the recent U.S. equity advance, climbing 95 points with 30 minutes left to the opening bell. Europe is strong this morning as well, so momentum is at the back of the bulls - at least to start the day.
The VIX has declined 4 of the last 5 days and a close beneath 16 would be a signal that the worst is likely over. Nothing is a guarantee, especially given the trade war. We know one headline could mean 500 points on the Dow Jones. The sentiment environment no doubt has improved, though, and that should be viewed as a positive for equities...
Read Full Story »»»
• DiscoverGold
Information posted to this board is not meant to suggest any specific action, but to point out the technical signs that can help our readers make their own specific decisions. Your Due Dilegence is a must!
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