Monday Sector Strength
All charts and comments intended for education and discussion purposes only. No investment recommendations are being offered. Comments below related to this post are encouraged. | MON - Sector Strength | TUE - Interest Rates | WED - Market Sentiment | THU - Commodities & Currencies | FRI - Market Breadth | SAT - Bullish Percents | About |
Below is one of the first charts I put up on this site last fall. I didn't change any of the text. I wish I had paid attention to my own chart. Small caps took a well deserved break last year and are back in the driver's seat again. I believe this is indicating some underlying economic strength.
Last week's post started by saying I would be watching this chart because indications were that it was going to break out. Actually, I thought it might need some short-term consolidation because the market was short-term overbought. I still think it is short-term overbought and we may see a restest to the break out point this week, but a break above the high of Jan-16 would certainly be favorable for the market.
Below is the short-term intermarket chart. Bond prices retested their short-term break out point and look to be continuing the up trend. Commodities certainly had a strong week confirming their short-term trend higher. The dollar sagged a bit more confirming its failure at resistance since the beginning of the year. And equities are in a relentless uptrend but with slowing momentum that everyone is watching. Bottom line: bonds are supporting the overall market as rates move lower, commodities are supporting commodity-related stocks, the dollar is supporting commodities and probably supporting small caps as its points to a limit on short-term rates, and equities are confirming its own trend with higher highs and higher lows.
The NASDAQ has been performing well lately, but shown in the chart below this strength is so far well within a down trend. The NASDAQ has a lot to prove before it becomes a market leader. At the moment, it looks like the NYSE and AMEX are taking a breather in favor of an oversold NASDAQ.
Nothing we don't already know shown below, but it is just that it shows it so well. Large cap relative weakness, mid cap relative strength and small cap looking good.
For February, materials and utilities are the big winners. Utilities are so overbought based on the bullish percent it is hard to imagine there is a lot of opportunity, but you can't fight it. Materials strength reflects the commodity strength and economic strength.
Strength in SOX is also a confirmation of economic strength, but also oversold conditions as it is attracting money as one of the few areas of opportunity left in the market.
