Technical Analysis: Stock Indices rally into afternoon trade
A mixed start to the day with the first hour marked by choppy trade at slightly higher levels for the S&P and Nasdaq Comp. The outperformance of the Dow, amid a rotation into more defensive large caps, noted last week has dissipated to some extent but it has been able to establish a new multi-year high. More flows today have been noted into big cap technology as the Nasdaq 100 is the top performing index. Technically the averages held in the vicinity of Friday's lows during the early choppy with the breakout of first hour ranges extended into the afternoon. Specific sector leadership has come from: Paper +3.5% (M&A chatter), Solar TAN +2.8%, Semi Equip XSD +2.3%, Steel SLX +1.9%, Mining XME +1.8%, Semi SMH +1.8%, Materials XLB +1.5%, Auto Parts +1.5%, Housing XHB +1.3%, Biotech IBB +1.3%, Technology XLK +1.3%, Computer-Hardware +1.3%, Chemical +1.1%, Disk Drive +1.1%, Telecom IYZ +0.9%, Machinery. Weaker sectors include: Crude Oil USO -1.7%, Bank KBE -0.9%, Reg Bank RKH -0.7%, Healthcare -0.2%. Last week's mixed/divergent action (Dow higher eight weeks in a row, small-cap Russell 2000 finished under previous six weekly closes) reflects weakening leadership after an extensive surge off Nov lows. However, given that the S&P has essentially formed a loose trading range over the last seven days as earnings are digested, inflicting no chart damage, a short term case can be make for upticks here and a bounce attempt in the small-caps. Initial resistance of interest for the S&P if able to work through Friday/today's high (1291) is in the 1294/1296 area (congest, multi-year close/intraday highs).
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